Saturday, May 23, 2015

Is the end near? Well..... hmm....

Three clients in one day last week asked for my view on all the doom and gloom predictions they've been hearing of late. While only one could detail the case he was referring to, I got the picture that at least one popular news outlet has been parading the David Stockmans, Peter Schiffs and Marc Fabers of the world. To more or less sum up my view on the antics of these gentlemen, here's a comment I posted on a recent Peter Schiff article:
Reading Schiff and a few of the reader comments I can't help but comment myself on the utter hypocrisy of Schiff calling out folks who sift the data to find only those tidbits that confirm their biases. Schiff is the poster child for that practice.

Ironically, I sympathize passionately with the Austrian ideal. I.e, Schiff often points out quite well the risks inherent on the road policy currently has us on. It's the arrogance of pretending to know how the uncountable factors at play in a global economy will ultimately translate to asset values, etc. that I find to be, well... arrogant.

You'd think that after several years of grossly missing the mark, the man would simply resign to pointing out the risks and dispense with the prognostications. 

As for Stockman, I read his book The Great Deformation. And, like Schiff, he passionately points out the risks inherent to the road we're on. But he continues to abandon all humility and, while pointing out the idiocy of all who don't share his views, predicts a forthcoming financial collapse that the 2008 recession will pale in comparison to.

As for Faber, well, like Schiff, had you taken all you could from his media appearances the past few years, and followed his presumed lead, suffice it to say you'd be one severely disgruntled "investor" right about now.

Here are two pieces in their entirety I'd like you to consider. I'll post the best first. While Don Boudreaux (a truly thoughtful, incredibly insightful and entirely uncorrupted economist) metaphorically points out the impossibility of effectively planning an economy (note the humility in the usage of the words "sometimes" and "potentially" [emphasis mine]), his elegant analogy speaks perfectly to the impossibility of predicting the future as well. The second (please pardon my own lack of humility) is an article I posted back  in 2012, when a popular fund manage pinched one of my nerves:     (I'll be back before Monday with my weekly market/economic update...)
A WING AND A PRAYER, by Don Boudreaux

My eye recently caught on t.v., in passing, an old film clip of someone trying to fly like a bird.  This would-be aviator had wing-like things strapped to his arms.  Of course, no amount of flapping would get this human being to take flight like the birds he sought to imitate.  One important reason, of course, is that we humans – as smart and clever as we are – can observe only a tiny fraction of the details of what enables birds to fly.  We can observe a handful of large details (“bird flaps limbs that extend kinda, sorta from bird’s shoulder”; “bird’s flapping limbs are made of lightweight things that we call ‘feathers’,” and so on).  But the amount of detail that we don’t – can’t – observe with the naked eye (even with a naked eye as careful as that of Leonardo) is overwhelming.  The bird’s musculature; cardiovascular system; weight and position and minuscule maneuverings of its tail – these and countless other relevant details aren’t observed.

The human being observes a bird in flight and then analogizes his – the human’s – limbs and muscle movements to what he supposes, from his observations, are those of the bird.  But the human is too easily misled into thinking that he can easily-enough mimic the bird’s body and movements and, thereby, achieve flight.

Obviously, no human can do so.  Such attempts as there have been by man to strap on wings, flap, and fly invariably failed – sometimes catastrophically for the pretend Icaruses.


Attempts to centrally plan economies are very much like attempts to fly by dressing like and flapping like a bird: utterly futile because the most that can be observed of any successful economy are a handful of large details (“assembly lines,” “retail outlets”…..).  The vast majority (99.99999999999…9 percent) of the details that must work reasonably well aren’t observed by the would-be central planner.  What  “knowledge of the particular circumstances of time and place” – knowledge of details spread today across the globe and across billions of different human minds – is not incidental to the successful operation of a modern economy.  Utilizing that knowledge – vast, deep, changing, incredibly fine-grained detailed knowledge – is the very key to a successful market economy.

Central planning is as futile as trying to strap on wings and fly like a bird – and potentially as calamitous.

Of course, few people today advocate full-scale central planning of economies.  But smaller-scale interventions suffer the same problems as do attempts at central planning: inevitably inadequate knowledge of how to intervene.  Asserting, for example, that the key to economic recovery is to “increase aggregate demand” is a fiction borne from observing a true, but only large and inadequate, fact about successful economies: most producers, at any given time, are able to sell most of what they plan to sell.  But to leap from this observation to the conclusion that “therefore, government can stimulate economic recovery by increasing aggregate demand” is akin to a human being costumed-up as a bird and leaping off of a mountaintop, flapping away, hoping, hoping, hoping to fly.



The “King of Bonds”, Pimco’s Bill Gross, has given the world a priceless gift. He’s accomplished something other mortals have aspired to, but forever at the expense of their credibility. Thanks to Mr. Gross we finally know precisely what to count on, financially speaking, for the remainder of life as we know it on planet Earth. The guessing’s over. I suppose I should re-think my career path.

Apparently the past century of stock market gains and wealth accumulation was a “freak” anomaly, one to never be repeated. His incomparable (out of 7 billion) brain, has put all the pieces together. He has solved the great riddle; he has determined what he’s dubbed the “new normal”: That is, sub historical-average economic and asset-value growth, in perpetuity.

In essence; he knows precisely how all the world’s individuals will transact their affairs for eons to come.

He foresees advances in consumer technology,


and living standards in general.

He can predict the outcomes of political power grabs,

weather patterns,

and natural disasters.

And has gauged the precise impact of each on the global economy.

He has indeed solved nature’s great mysteries.

What forever baffles me is the correlation between the capacity for thinking and the lack thereof for reason. The sad thing (seemingly, but surely not in every case) being; the larger the capacity of the brain (or perhaps the academic achievement, or perhaps the professional accomplishment), the larger the ego – the larger the ego, the lesser the humility – the lesser the humility, the greater the God complex – the greater the God complex, the greater the following – the greater the following, the greater the damage when a black swan (a purely random event) falls from the sky.



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