Wrong For The Right Reasons: And Why It Matters

There’s been a consistent theme of retort from many across the financial media. It consists of a two-sided response. The first sounds something like this: “How long have you been saying things were dire while the markets have continually risen?” This is a backhanded way of dismissing anything one has said previously, currently, as well as followup during the discussion. i.e., You’ve been labeled a scare monger. And a poor one at that.

The other is the outright or, blatant dismissive. It sounds something like this, “Well that’s your opinion. I should state there are many more who take the opposite view.”

Well, yes there are. However, that doesn’t mean they are either correct in their assumptions or, can argue why their view is correct. Yet, this is what’s done when someone wants to invalidate your point. It’s a snarky little way to dampen any legitimacy to one’s argument without further discussion. It’s a technique that’s used by many across the financial media as well as others. It’s subtle, however, to a trained ear – it speaks volumes about the user.

Personally I’ve had such things thrown at me and I detest them, for they’re vapid statements made by people who have either lost an argument they can not win or; think they are so smart they openly tout they don’t need deodorizers in their bathrooms. When I’ve been faced with the latter response my knee-jerk reaction has been to cite something similar to following:

“Well, that may be the case. But let’s just remember: Many a bull or pig believed based on valid assumptions that indeed; the farmer has their best interest at heart. After all who could argue otherwise based on all the free food, room, and board they receive? Unless you’re one of the few that escaped the “stock” yard and seen where the happy-trail ends. The one’s remaining in the yard can argue the other side all they want – it doesn’t mean they are right or, have a valid argument. Does it?”

Usually that’s when the conversation truly ends. There’s no further follow-up except for the ensuing stink-eye I’ll then be showered with. However, at least it ends with the snark now being called into question rather, than the other way around. (I know N. N. Taleb uses the turkey analogy which I’m of the same idea. It’s just my roots began in the beef business.)

Remember: These are techniques used or employed as to invalidate legitimate arguments with vapid reasoning. Once you understand and can discern them in real-time – you’ll never see an argument or discussion in the same light again. And these forms of discussions are now coming across both the financial airwaves, as well as print, at a fast and furious pace.

Why you might ask? Easy: everything you were told by that media that should no longer happen – is happening – at – an ever-growing fast and furious pace. So much so the “everything is awesome” crowd are now looking more like “deer in the headlights” with every passing market movement.

Let me illustrate it using the first line or technique I started with. The line of: “How long have you been saying things were dire while the markets have continually risen?” Well, let’s look at the most current example to show just how “dire” these markets truly are shall we?

As of today just how much worth (as well as wealth) has been wiped out as I iterated “at a fast and furious pace?” Suddenly, over the last 6 months; Trillions of $Dollars in market cap have been wiped out across the U.S. capital markets alone. If one uses a global index the wealth destruction is now double-digit Trillions. (e.g., $17 Trillion and rising) To put that into context:

In the last few months more than half, repeat, 50% plus, of the “wealth” affect everyone was so keen on singing its praises reminiscent of “happy times are here again” from 2011 till now globally: has been evaporated. i.e., gone, wiped out, you don’t collect $200 for passing Go. Thanks for playing.

All of this is happening against the backdrop where both the so-called “smart crowd” along with the Ivory Towered set expressed; a 25 basis point rate hike in the current climate was a non issue. In effect it was touted: It’s a good thing because the economy is in much better shape to withstand it. Or best yet, “just do it.” Suddenly all that “much better – just do it” emphasis has turned into “Please make it stop – things are going from bad to worse!”

This isn’t conjecture. Too think 50% plus of capital being evaporated within months wiping out years of profits, principal, as well as interest assumptions for carry trades, let alone solvency concerns of counter party exposures or, currency upheavals throughout the global financial world won’t result in far more volatile market swings within the U.S. going forward, let alone what has already transpired just this year alone is nonsensical at best. Idiocy at worst. We just happen to be the laggard as to feel the full brunt of what is transpiring throughout the global markets in my opinion.

Something that was scoffed at as “unimaginable” is suddenly not only the opposite – it’s arriving on our shores with voracity to what appears a totally unprepared market. All taking place against the backdrop the so-called “smart crowd” touted for years things like this – were behind us. So much so that even the “smart crowd” is beginning to openly worry or, raise concerns. So, with that in mind: do you think things are about to get better or more stable? Let’s postulate that using the following:

Remember the above analogies? Who do you think has the valid argument? An escapee from the “stock” yard? Or, the bull that’s currently sitting with his fat profits, and snarky demeanor currently holding his position tagged at #436 in the middle of the line? After all, it would seem more agree with him than does you. So: Think he has a valid point? Again, as proof to bolster his argument he’ll also throw out, “Look at you! You’re now so skinny compared to him. How many meals have you missed since getting out?”

See what I mean? Doesn’t sound so “smart” or “definitive” as to back up any “everything is awesome” based argument any longer once you understand does it? Yet, that won’t stop many across the media from positing such an argument. While as much as the above may represent those remaining in the “stock” yard. What truly should be unnerving for many a bull is that the owners of those yards (i.e., the current guest list flying home via private jets from Davos) are themselves frantically trying to explain (or plead) why “everything is awesome” is not turning into a bona fide shite storm.

Premier hedge-funds are closing at an alarming rate. Once seemingly “can’t lose” funds (see Ray Dalio’s “All Weather” for clues) and strategies are doing exactly the opposite. Some funds have needed to gate their investors entirely until further notice. And there’s a whole lot more. And when has all this taken place? Or, better yet: what has been the catalyst for all this mayhem? The one thing people like myself and others have banged our fists and keyboards to anyone that would listen. The ending of the only thing that made up this “market.” QE (quantitative easing) along with a protracted stranglehold to remain at the zero bound. (e.g., ZIRP)

Over these ensuing years of Fed. interventionist monetary policy, all the one’s that donned their investing “genius” or, monetary policy analytic “brilliance” caps were the first and loudest to the TV cameras, microphones, or keyboards to denounce people like myself and others as “conspiracy whack jobs,” “gloom crew,” “tinfoil hatted kooks,” and a whole lot more. However, today?

Unlike many a financial guru, next in rotation fund manager, Ivory Leagued or, Towered academic that touted their economic brilliance or, stock picks ad infinitum to anyone still listening. People like myself and others have consistently argued against the validity of manipulated data points (see “double seasonally adjusted” for starters) and expressed the consequences that would follow to anyone foolishly doing the opposite.

Again, unlike those aforementioned: We didn’t argue why adulterated data should be believed. We didn’t argue why people should take solace in the current employment picture of 5% as “a good jobs number.” We wouldn’t submit to the relentless brow beating or, ambush styled financial reporting (see any Bill Fleckenstein or a Peter Schiff CNBC™ interview for clues) handed out on many a financial channel and others. Quite the opposite. Regardless how high the “market” kept ascending.

What is currently transpiring in the markets today is exactly what the “everything is awesome” crowd stated wouldn’t happen – and exactly what people like myself and others argued – was inevitable. And, suddenly it is they who are finding out the rarefied air of “brilliance” the Fed. enabled them to breathe has indeed been shut off – and all that’s left to inhale is their own exhaust fumes.

I recommend this might be a good time they stock up on that much dismissed deodorizer. Because, in my opinion – they’re going to need it by the time this rout is over in the coming weeks and months. Unless it leaves them scared sh–less much like the poor investors and others that continued to believe their assertions are currently finding themselves.

© 2016 Mark St.Cyr