Over the course of the last few years one thing that has been prevalent more to my eye than nearly any other time I can recall is just how many so-called “experts” have lined up whether to be “next guest” on TV or radio. Or, they’ve taken to the pages of print, screens, or books to proclaim how their prognostications “were surely sound.” And as proof they were quick to point to the financial markets. The rationale? They must be correct in all their assumptions for – “Just look at these markets!” Well suddenly when one looks at these markets – it’s not for the reasons the “experts” wanted.Now it’s: “What in the world is going on in these markets!?”
As I write this, every market in-which one was told were trading at all time highs based on “fundamentals” isn’t just faltering. Some are in outright panic mode. China’s markets are in outright free fall. So far every attempt to stem the losses has been met with even more selling pressure. So much so, hundreds of some of their largest companies have been halted (i.e., can’t be sold) for fear of complete collapse. The PBoC as well as other proxies within their markets have pledged 10’s of BILLIONS of yuan (worth 10’s of billions U.S. for comparison) and it worked for less than 24 hours. So far the market losses are in the TRILLONS of share holder cumulative value. And as the market prepares to open once again, the fear is the worst is yet to come. Every market opening as of Monday has turned from “excitement” as the market went ever higher to – just a hold your breath and pray. Not in Years, and really, not even months – but weeks.
Greece has done the exact opposite of what all the “experts” said it would do. Now that other part of the equation that was supposedly “ring fenced in” or “priced in” seems to be anything but. Today alone the U.S. markets are showing just how vulnerable they are. Every so-called “dip” is once again being bought. However, not for the reasons of just a few months ago. Today, those dips are being bought purely out of what is known in the field as “headline risk.” This risk isn’t what it was a few years ago. Today, “headline risk” is fueled by the parasitic scourge of the markets now known as High Frequency Trading (HFT.) With these machines set to read any headline (good or bad) then launch their arsenal of front running, algorithmic stop hunt seek and destroy programs – you get a market as was shown today. A perfect headline of “Looks like we have a maybe!” and the swing from the lows to highs was so predictable it was laughable. (funny how we’re getting these as Europe’s markets close, then 30 minutes before ours do…no?)
This isn’t anything resembling “efficient markets.” This is what a pure adulterated markets look like. And it’s only the beginning in my estimation.
None of what is currently transpiring in the markets was supposed to be there. The so-called “smart crowd” said people like myself were “idiots” for questing their reasoning’s. I have only one question I guess: How’s all that “fundamental” “fairly priced” __________(fill in the blank) holding up when looking at the price action of just Monday and Tuesday?
I’ve had a few conversations over the last few days and some have been quite interesting. One of the main questions (because the topics discussed were being very highly debated as were the conversations a little heated) how was it that I have not only “stuck to my guns” as far as my premise (that premise being that most financial “experts” were full-of-it) in the face of so many telling me both privately and publicly that “I was wrong.” And it was pointed out to me (more than once) many of those “experts” are some of the biggest names in finance.
I had an answer, however the answer I gave was not as poetic as the one given by Richard Feynman that I have framed hanging in my office. I’ve pretty much made my career of doing what the so-called “experts” normally state “can’t be done.” By doing – exactly that. My career stands as my testament. However, for those who ever doubt themselves, or sometimes feel they shouldn’t voice their opinion on certain subjects when deep down they know they have a valid argument, but feel hindered to express it because someone else doing the “expressing” is considered a so-called “expert” therefore who are you to question them. I’ll leave you with Mr. Feynman’s quote on “Experts.”
“There are myths and pseudo-science all over the place. I might be quite wrong, maybe they do know all this… but I don’t think I’m wrong, you see I have the advantage of having found out how difficult it is to really know something. How careful you have to be about checking the experiments, how easy it is to make mistakes and fool yourself. I know what it means to know something. And therefore, I see how they get their information and I can’t believe that they know it. They haven’t done the work necessary. I have a great suspicion that they don’t know and that they’re intimidating people.” – Richard Feynman
(For those maybe not familiar with Dr. Feynman, just one of the historical points and contributions he’s made to science and physics, he was the man who diagnosed it was the O-rings that caused the Space Shuttle Challenger’s disaster.)
As I’ve stated so many times before, there are two types of “experts.” One who has done what they profess which gives them both the perspective, along with the ability, to express what they believe will help others. Or – like the many out there – who’ve only: read someone’s book, about what they read in someone else’s book, and now wrote a book, so that you can now buy their book – to read – what they’ve read.
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