Obama and Bernanke are economic fools

[rwh11385]

add bill gross (manages $1.7 trillion) to the long list of crackpots

http://www.zerohedge.com/news/2013-0...s-churchillian

So you hate Gross but love El-Erian? Is it strictly based on what they are saying? Do you immediately accept or deny what they say based upon if it agrees with your prior belief? So that you never actually consider if their argument could possibly have merit? Simply that if it supports your assumptions that it is good, and if it goes against them, then it is bad.

That is the definition of confirmation bias George. And why you immediately laughed and talked shit about the idea that emerging market bonds might have been overvalued and completely exposed to this year-to-date's lackluster results. Are you assuming right now that it is IMPOSSIBLE for the treasurys' top to have been passed or the bond bull market to be over? Is this because your decisions would have been poorly performing if this turned out to be correct? Your choosing to remain ignorant of other ideas to protect your ego is a weakness and leaves you wide open for reality to not turn out how you assume it will. And why you are frustrated with your 9% last year... you ignored any positive sign or marked it up as a conspiracy like "Tyler Durden" said, while seeking out people with bearish stances to make you feel better / more comfortable with your opinion. How little self-esteem do you have that you are incapable of questioning the basis of your economic outlooks and are only able to read people who tell you want you want to hear?

oh and BTW, if you think buffet plays on a level playing field you're far more ignorant than you prove daily

Who said that? He obviously has advantages that few others have, but are you so upset over that... or what he is saying... that you cannot consider the concept? Are you refusing to even think about the investment advice from Warren Buffett? (Regardless of how incredibly ironic that is because of the advice itself) That habit of yours to put your fingers in your ears and then shout the latest opinion of someone who is banned from trading and wants to see the Dow reset to zero is pretty limiting of your ability to understand reality.

What if someone else said the same thing? What if it was someone who you revere, supposedly read on a daily basis, and pay to go to conferences in which people like him speak? Would you consider the notion that you should be aware and work to combat your confirmation bias in order to be a better informed and decision-making investor?

http://www.mauldineconomics.com/frontlinethoughts/three-men-make-a-tiger

Dealing with Confirmation Bias

People tend to cling tenaciously to their views or forecasts. Once a position has been stated, it is very hard to move away from that view. When movement does occur, it is usually only very grudging. Psychologists call this conservatism bias or confirmation bias (it can lead to anchoring, which I have written about in previous letters).

We see this all the time in earnings forecasts from analysts. They sound nearly religious in their predictions that future earnings will look like past earnings. Analysts are exceptionally good at telling you what has just happened. They have invested too heavily in their views and hence will change them only when presented with indisputable evidence of their falsehood.

...

This reality leads to a rule:

Don’t get hung up on one technique, tool, approach or view. Flexibility and pragmatism are the order of the day.

We are inclined to look for information we agree with. This thirst for agreement, rather than refutation, is known as confirmation bias.

...

Our natural tendency is to listen to people who agree with us. It feels good to hear our own opinions reflected back. We get those warm, fuzzy feelings of contentment.

These phenomena are all tied up in our human quest for certainty. It is notable that we tend to associate with those who think like we do and confirm the rightness and wisdom of our judgments and views, whether on investments, politics or religion. This behavior only reinforces the tendency to set in concrete wrong views, attitudes … and predictions.

Sadly, this isn’t the best way of making optimal decisions or getting the deepest insights into any topic. Instead of listening to the people who echo our own view, we should make a point to try and understand those who disagree.

So no, you can't just discard the idea of your confirmation bias because you don't like Warren Buffett and want to cover your ears rather than consider his advice. This is because it is also a concept repeated by someone whose opinion you value. Now you can either deal with the idea and learn and grow, or continue to be narrow-minded, simple, and biased. If you keep only listening to the people who echo your own view and then parrot them to your clients, you are doing them a grave disservice as well as risking that reality will turn out quite different from your assumptions.

[gwb72tii]

well your comments are as relevant as your opinion that the world economy is ok, and the markets are driven by fundamentals

you're a majority of one in your deluded world

so, you deny the world macro view is declining?

and if you could re-read my post re bill gross, he agrees with me

[rwh11385]

well your comments are as relevant as your opinion that the world economy is ok, and the markets are driven by fundamentals

Which comments in particular? There's been a lot of discussion about economy on my side and just a lot of posting links to zerohedge from you. Do you actually understand anything, or just parrot what someone else thinks constantly? Can you have an intelligent conversation or just hand your clients a print-out of someone else's words?

you're a majority of one in your deluded world

Ironic. Looking back at the last year and a half or so, it's pretty clear that you had been the deluded one in your own little "reality".

so, you deny the world macro view is declining?

I wouldn't summarize or simplify the entire world in one basic direction, but note specifically where there is positive news and where there is negative. And also discuss what significance each has. This allows for discussion and debate, based on facts, reason, and logic. Dumbing it down helps no one and waste everyone's time.

You use words like "crater" or only focus on beat or miss (while generally ignoring beats or go quiet when they happen), which don't provide any useful understanding of magnitude. http://www.r3vlimited.com/board/show...&postcount=104

EU is still in trouble, in part likely due to the austerity-encouraging Excel error.
But look at Japan's growth. Or Sub-Sahara Africa's.
Or look at Cisco: http://stream.wsj.com/story/latest-h...9/SS-2-233129/ Or homebuilder confidence. Or consumer confidence. Or Tesla.

If you only pay attention to negative news, then you will clearly have confirmation in your mind that your pessimistic outlook is valid. How did that go for you last year?

and if you could re-read my post re bill gross, he agrees with me

So you find confirmation in your interpretation there but ignore his statement about the 30 year bond bull market coming to an end? Or him seeing Treasurys' top? The tweet in question could have also meant reaching for high priced Treasury bonds with such low return and taking so much risk in junk bonds for such low yields.

It is obviously not certain that such a call will be correct, but something anyone with the ability to handle their confirmation bias would consider. Especially considering: http://online.wsj.com/article/BT-CO-...14-714698.html
Treasurys Extend Selloff as Fed Tapering Talk Resurfaces

Or just go about your usual George ways and assume it is not possible and state that your groupthink peers laugh at such a notion.

[gwb72tii]

forewarned is forearmed

seems bill gross has something else to say, as in the stock market, bond market and worldwide markets are muck riskier than it seems

http://www.zerohedge.com/news/2013-05-16/bill-gross-we-see-bubbles-everywhere

and you, rwh, laughing at me is a badge of honor in a way.
the pseudo economist that can't shoot straight LOL

[rwh11385]

seems bill gross has something else to say, as in the stock market, bond market and worldwide markets are muck riskier than it seems

http://www.zerohedge.com/news/2013-0...les-everywhere

Hmmm....

The tweet in question could have also meant reaching for high priced Treasury bonds with such low return and taking so much risk in junk bonds for such low yields.

I just suggested in the bond market with a bubble in treasuries and bubble in narrow credit spreads and high-yield prices, that perhaps there is a significant distortion there.

Seems like I wasn't wrong...

and you, rwh, laughing at me is a badge of honor in a way.
the pseudo economist that can't shoot straight LOL

So you take pride in people disagreeing with your statements of arrogant certainty like 2012 Q1 recession or that the emerging bond market couldn't possibly be overvalued instead of actually considering it? What a huge ego you have George.

How are you forewarned if you only consider what you already believe?

[gwb72tii]

no, in fact you've been completely wrong on bonds so far
and bill gross is on record of being a buyer of treasuries when the 10yr gets close to 2%

and yes, all asset classes are in a bubble as i have said before

and dudet, you're far so out in left field regarding emerging market debt you look like a fool. imagine that? again?

[rwh11385]

no, in fact you've been completely wrong on bonds so far
and bill gross is on record of being a buyer of treasuries when the 10yr gets close to 2%

and yes, all asset classes are in a bubble as i have said before

and dudet, you're far so out in left field regarding emerging market debt you look like a fool. imagine that? again?

So far? So you again only look to the past and refuse to ever consider what the future holds? So much for being forewarned while driving staring in the rearview mirror.

Really? How so? How would you describe emerging market debt??? Care to use any data to support your claim? Or you are just going to make statements and try to insult me? Because after last year's binge, this year seems pretty dismal for emerging market bonds.



So how them leading indicators look George?

http://www.conference-board.org/data/bcicountry.cfm?cid=1

Solidly beat expectations

Or consumer sentiment?

http://blogs.wsj.com/economics/2013/05/17/consumer-sentiment-hits-nearly-6-year-high/

Consumer Sentiment Hits Nearly 6-Year High

But good news must be a conspiracy right? (While negative news is immediately credible)
What did David Rosenberg say? "Get the U.S. consumer right and everything else will take care of itself"

You liked ECRI right? You look at their data or just their missed promise of recession?


Seems pretty good movement since end of 2011. But Achuthan doesn't admit it, although it is his own data.

In other news:

http://online.wsj.com/article/BT-CO-20130517-709161.html

Dollar Index Nears 3-Year High on QE 'Taper Talk'

http://online.wsj.com/article/SB10001424127887323582904578488993579577704.html

Gold's Selloff Deepens as U.S. Picture Improves

Let's hope no one bought silver last year when you were talking about it.



Not all news has been positive, but I also expected April and May to be choppier. However, completely ignoring positive news or considering the possibilities because of stubbornness is just exposing you to the risk of reality not matching your assumptions.

You said you read Economist regularly, right? Did you see this?

http://www.economist.com/blogs/graphicdetail/2013/05/economistft-survey

FOR the second quarter in a row our global business barometer is in positive territory, according to The Economist/FT quarterly survey of over 1,500 executives. Overall confidence, measured as the balance of respondents who think global business conditions will improve over those who think they will worsen, turned positive in the first quarter of this year for the first time since the survey began in 2011.

[gwb72tii]

well robert. congrats

april was the first and only month this year where stock funds had more inflows than bond funds

you were finally right, sort of

there is no rotation out of bonds, there is money flowing into bonds, more than stocks for the year

and i also want to congratulate you on your amazing (for you) epiphany that investing is about the future, not the past, and where prospective gains will come from, not where they came from. i guess you were awake for at least one part of one class in econ 101

[rwh11385]

april was the first and only month this year where stock funds had more inflows than bond funds

you were finally right, sort of

there is no rotation out of bonds, there is money flowing into bonds, more than stocks for the year

Thank you for a chiefly mature post to discuss this subject - it's quite the refreshing change.

I wouldn't consider that to be the full extent, nor expected it to be a snap response that ushers in a new wave this year like some were implying - but rather as I said a slow motion. Sure, the good run last year and great start to this one might invite some more people back into stocks, but it'll take time for others to re-enter equity investment, no longer be spooked by the past or talk of Ben and his QE, etc. http://www.gallup.com/poll/162353/st...ecord-low.aspx But the plus side is young people who do invest appropriately for their career lifecycle position will hopefully benefit from an eventual transition of more people back into equities. I've had nice returns during the time you warned stocks would be dismal, but the real focus is decades out and building wealth, not simply protecting it like your clients are concerned with. Whether growth picks up to a healthy level this year or the next, the point is to be invested to harness that... not make calls after the fact of woulda-coulda-shoulda. I also have many years to overcome a correction, but the biggest risk is missing out. 2-3% won't get me where I want to be.

As long as there is huge demographic of retirees and soon-to-be-retirees, there will be a large sum of people investing in fixed income. The question I tried to have you respond to starting with the WSJ at the beginning of the year was will they find satisfactory returns strictly in bonds. As I've stated sometime before, simply because your focus is defending assets from risk does not imply that bad things are bound to occur and you can't let that bias distort your perception.

and i also want to congratulate you on your amazing (for you) epiphany that investing is about the future, not the past, and where prospective gains will come from, not where they came from. i guess you were awake for at least one part of one class in econ 101

You are aware that you argued many, many, many times about how bonds performed X well over Y years as support for why you were all about them still, instead of what the present year held for them, right?

here's a few numbers for you to chew on, and no i'm not going to link you. you say your a smart guy so if you doubt the numbers, they are easy peasy to find

compounding rates of return;
barclay's 20+ year us treasury
3yr 14.80
5yr 9.72
7yr 12.07
10yr 7.85

s&p500
3yr 10.87
5yr 1.66
7yr 5.81
10yr 7.10

2012
s&p 500 16.00
jp morgan emerging market bond 18.53
plus this is the single best category for the last 1,3,5,7,and 10yr time periods

Emerging market bonds being the single best category for the last 1,3,5,7 and 10 year time periods didn't really mean **** for 2013 so far did it? Same with Barclay's 20+ Year US Treasury. You had some kind of tunnel vision or assumption that things would continue indefinitely while ignoring any ideas to the contrary.

[rwh11385]

In other news:

http://www.bloomberg.com/news/2013-05-20/fed-s-evans-says-economy-has-been-improving-quite-a-lot-.html

Fed’s Evans Says Economy Has Been ‘Improving Quite a Lot’

“I’m optimistic that the labor market has been doing much, much better and that unemployment is going to continue to go down,” Evans said in a speech in Chicago today. “Currently we have the appropriate monetary policy in place.”

http://www.nasdaq.com/article/consumer-spending-housing-to-compensate-for-us-government-spending-decline--nabe-20130520-00005

Consumer Spending, Housing to Compensate for U.S. Government Spending Decline -NABE

WASHINGTON--Strengthening consumer spending and housing investment should compensate for a decline in government spending this year, according to a survey of economists released Monday.
The poll of 49 economists conducted by the National Association for Business Economics forecast that consumer spending will increase by 2.3% and that housing investment will rise by 15% in 2013, up slightly from a forecast from earlier this year. In a February survey, the NABE had forecast the two categories would rise by 1.9% and 14.8%, respectively.
On the other hand, the NABE May survey forecast government spending will fall by 2.3% in 2013, a larger decline than the 1% drop it predicted in February.

Overall, the NABE forecast that gross domestic product will post a 2.1% annual average growth in 2013, up slightly from its 2% forecast in February. In 2012, GDP expanded at a 2.2% annual average rate.
The NABE, however, forecast that the decline in government spending will taper off in 2014, allowing annual-average GDP growth to accelerate to 2.9%.
Recent indicators have pointed to a pick-up in consumer spending as households gain confidence in the economic recovery. Housing has been on the rebound as prices rise and buyers return to the market. The NABE predicted that light vehicle sales will increase to 15.4 million units from 14.4 million units in 2012 and that new housing starts will rise to 1 million units this year from 780,000 last year.

Hopefully this will occur and we won't have shot ourselves in the foot too severely with the sequester (although some effects may be delayed). If growth does pick up in the second half, hopefully QE is tapered (to whatever impact on stocks it may have) and we can start getting back to normal. However, the country still has a huge long-term unemployed problem, a bit of lack of skilled technical labor, and a giant looming cost of future medicare and social security. However, the deficit is shrinking quickly currently, so if Congress focuses on repairing the mandatory spending problem, the country might get more fiscally responsible. We'll actually need intelligent conversation in Congress about what policies are necessary to grow in the future - like immigration reform and a simplified tax system.


Wednesday's existing home sales should be interesting. I guess I wasn't too shocked by last month's figure because of inventory limitations. I'm house shopping and all the good ones or even half-decent ones are pended in a week. There was a line of people outside the showing Saturday waiting to go in after me. Crazy different from a couple of years ago.

Similarly crazy different is the US's energy outlook with positive impact for the economy. With the approval of another natural gas export facility and potential of Keystone XL and more renewables and better American fuel-efficient vehicles, we have more control over the energy necessary to run out country and our oil imports are shrinking which is benefiting our trade balance as well as independence. http://www.eia.gov/dnav/pet/hist/Lea...s=mttntus2&f=m

http://www.aei-ideas.org/2013/01/us-drilling-boom-brings-net-oil-imports-to-a-20-year-low/

[Wiglaf]

http://www.forbes.com/sites/adamhartung/2013/05/16/economically-could-obama-be-americas-best-president/

bam. :D
I can almost hear the heads exploding

[gwb72tii]

http://www.forbes.com/sites/adamhart...est-president/

bam. :D
I can almost hear the heads exploding

stocks are not a valid assessment of the economy doing well

[Wiglaf]

not what i was expecting but i like your statement

[Fusion]

Wall Street is happy about QE.
Otherwise everything is somehow opposite of what it should be. DJI is becoming a false indicator of the economy.

[gwb72tii]

bobby, you're tying yourself in knots trying to validate a falsehood that somehow, if you post enough numbers and data, you can fool someone that stocks have outperformed bonds since 1998, that emerging market bonds are somehow terrible because of a 5 month window of undeperformance, and that you're smart.

the only person fooled so far is................................................ ..you




and for the rest of you, here is something to consider when stocks go to where they are today, 2 std deviations above their mean price/earnings ratio (maybe bobby can explain probability for us all when he chimes in to disagree).

the bear market of 2008/09 wiped out all S&P500 returns back to August 1996.