Apparently running a website entitled ‘FallStreet.com’ for the last 10-years and being objectively pessimistic on the markets is not enough - I still get emails attacking me for being ‘like the herd’, ‘useless’, and for following the ‘status quo’. The latest batch of fan mail came in response to yesterday’s piece, which apparently wasn’t bearish enough for some…
The problem with many of the ‘super-bears’ is that there is no pleasing this crowd (nor should anyone try). Rather, in the land of super-bear the rigged employment figures spell imminent doom, the heavily manipulated price of gold is proof that widespread civil unrest is pending, and anyone who takes issue with these types of theories has been bought. While I don’t disagree with a lot of the facts explored within most of the super-bear theories, I do oppose many of the conclusions.
The World is Competitive and Unfair...So What?
To begin with, there is little doubt that there is a concerted effort to conceal the true depth of the U.S. economic downturn. This is the case whether you care to study the heavily massaged employment statistics, GDP data, or the simple fact that the Fed no longer reports M3. There is also little doubt that the mainstream media avoids any serious interrogation of the financial markets and economy, is myopically bullish, and the cliental they keep is largely inept (i.e. if the ‘experts’ were wrong about the biggest crisis since the Great Depression why are they still the voice today?) Finally, there is no doubt that great effort is exerted by policy makers to ensure that the financial markets have a built in upward bias. This is the case when you look at the actions of regulatory bodies like the Fed, SEC, NYSE, etc., or the politicians, all of which place the goal of market stability (artificial or not) ahead of transparency.
But even with this knowledge in hand, the case for calling for the imminent destruction of the U.S. economy and financial markets is not present. Rather, what the super-bears conveniently neglect to mention or do not readily see is that other policy makers and governments also do their best to conceal, manipulate, and slant their statistics and policies. This isn’t a conspiracy theory so much as the understanding that there is competitive forces at work everywhere, even when it comes to rigging markets, currencies, and economies.
So, the U.S. has been highly successful at keeping its artificial economy going – ...and?? Anyone can collect and produce a body of evidence that paints a negative picture for the financial markets and U.S. economy. The trick as an investor is to make this information actionable based upon current realities.
The Crux of the matter
Whether they realize it or not, every argument for meltdown the super-bears conjure up is heavily reliant on the U.S. dollar. So long as the U.S. dollar lives the prospect of a system-wide financial collapse is off the table (for that matter, so long as all U.S. debt is dollar denominated the prospect of the U.S. turning into Argentina or Zimbabwe is also off the table). If you try explaining this to many super-bears you have hit a wall. I will attempt this feat using super-bearspeak:
Until the worthless USD crashes the manipulated statistics and biased media are important because the sheep that hold worthless dollars are watching and reacting to them!
Super-bears are either oblivious to the above fact or believe that one day everyone else (the sheep) will finally learn the horrific financial truths they have unmasked. If the latter perhaps the super-bears have an agenda in that they are simply recruiting new members?
Whatever the super-bear’s intent, the fact remains that a freely floating worthless USD has been around for nearly 40-years. Will this last another 40-years?
Even Super-Bears Need To Smile
More than 7-years ago I discussed a ‘manipulation paradox’. Obviously a refresher is required:
“...just because the gold market is manipulated this does not necessarily mean that the price of gold is destined to surge when, and if, the manipulation 'ends'. To be sure, if the manipulation in gold were to ever really end there would be no 'price' for gold. Rather, there would just be gold.”
The super-bears may be well served to understand this paradox. It says that if you own gold (as all super-bears do) and you have a paper selling price you are in fact optimistic that the entire monetary system as we know it will not completely implode. It’s OK to be optimistic super-bears – smile! Rest safe in the knowledge that if stocks drop by 99% you will sell a few ounces and try your luck…
As for those super-bears that do not have a paper selling price in mind and/or can not on any level envision any set of circumstances that would ever compel them to sell their precious metals -- what the hell are you doing reading investment commentaries online? Ahh yes, doubt…
There is nothing wrong with being a bearish investor. After all, the U.S.’s fatal debt disease does look incurable, current trends strongly suggest that sovereign defaults are around the corner, and the financial/monetary order in the world as we know it may well be headed for an unprecedented upheaval. These and other ominous topics are an important consideration for the investor looking to delegate capital over the long-term.
With this said, something may be amiss if everything you look at is telling you that the end of the world is near and your investment life revolves around preparing for and/or imploring others to prepare for financial chaos. Quite frankly, if you wake up every morning thinking financial Armageddon you are going to see financial Armageddon, but that doesn’t mean that everyone else ever will.
Super-bears should purchase precious metals, guns, and be ready to load up on food when, and if, the mayhem they envision arrives. But perhaps what they should avoid doing is treating every piece of data as one giant conspiracy and/or resist carrying these conspiracies over into the land of investment. To wit, if there really is an unstoppable secretive group looking to collapse the dollar and start a global government as an investor I could really care less. Why? Because you just told me that they were unstoppable and I already own precious metals.
The idea of the investment game is to know what the people holding the worthless paper money are likely to do next and, on a fundamental level, why. If you don’t trust paper money altogether (I surely don’t) take some off the table and purchase precious metals.
For the record, I consider myself to be a Cub with Grizzly tendencies (as per Bear Index below). If any of my super-bear fans care to attack, be sure to mention where you fall on the index. It is nice to know what type of animal you are dealing with.
Finally, perhaps if I end with something exceptionally bearish all will be forgiven? Here goes: the non-U.S. world is becoming more aware of the U.S.’s borrow-and-print prosperity schematic...but I don’t think they are ready to overthrow it. Damn honesty. I tried...