I’ve written before about the tendency of commentators who are Obviously Clever to be negative about the stockmarket, and how in this they are generally completely wrong, at best, or at worst simply confusing. It’s not as if you can use them as contra-indicators because sometimes, just often enough to keep them in business, the stockmarket actually does go down. The negativity is widespread among practictioners and the chattering classes. Some really make clever points (Epicurean Dealmaker never got back to me; maybe he had an associate to torture instead — “now make all these charts Blue, you little shit”. I’ve been there), others merely supply sub-taxi-driver drivel.
But for a really serious case of ants in the pants, you can’t do better than the Buttonwood column in the Economist. The latest one is not on the web yet. Let me describe it from a copy of the print version which I keep next to my toilet:
Signs of the Beast is the title. 2 evil yellow eyes peer out at you from the dark in the accompanying illustration. Despite the rise in assets of the past few years (fought at every step by the Economist) things are “almost been too good to be true”. Investors may be complacent. The “grubby” bargain between high saving Asians and high spending Americans may break down. Steven Roach. Carry trade unwinding. 3 things to panic about when they happen: i) yen ii) spreads iii) inflation. OK, sure, “equities may be the asset class best placed to withstand inflation”, BUT “a world in which inflation, bond yields and short rates were trending higher would be the complete opposite of that which has prevailed in the long bull run”. We’re screwed, or rather you are.
A more priceless regurgitation of received wisdom and consensus hand-wringing I never yet did read. All the more amusing that the day the Economist went to press (I think it is Thursday), the few down days in the market which had inspired the piece were paid off with a major high volume, late day rally to new highs with another big follow-through on Friday, when this edition fell into my letterbox.
I looked through all the previous Buttonwood columns on the web. They are equally windy. Not one of these articles has helped anyone to make money in financial markets:
- Mar 1st: Subprime meltdown. Great joy. Bonds are doomed, “risk is cubed”, it will spread to equities!
- Mar 8th: Investors cannot diversify; all the traditional asset classes are correlated to stocks. Apart from the weather. Oh dearie me.
- Mar 13th: It’s all a Ponzi scheme. Housing infection is spreading. “No one knows when the credit cycle will end . . . But the pyramid is beginning to look a bit top-heavy”.
- Mar 20th: synthetic hedge funds designed by academics may beat actual hedge funds! Of course! What schmucks we were to pay 20%!
- Mar 27th: idiot buyers of corporate debt, soon to be thrown into the subprime meltdown, will eventually be hit when the “credit cycle ends”. Can’t wait!
- April 4th: Buttonwood discovers something called “the currency market”. Deutsche Bank has a good model. It is possible to make money using these “currency markets”.
- April 12th: everyone but Buttonwood is complacent. Things we don’t know about might hurt us.
- April 26th: corporate buybacks are unsustainable. Only Buttonwood looks at the long run. He may look stupid now, but just you wait!
- May 3rd: Buttonwood accepts the media can sometimes be too bearish on stocks. Huh?
- May 10th: rising share prices are good for people who own shares. Those who don’t miss out on gains (words fail me here).
- May 17th: Mean or meaningless. Sometimes mean reversion is hard to get right. Sometimes it isn’t. You’ll lose either way.
- May 24th: Art. That’s a market Buttonwood likes. Much more cultured.
- May 31st: people who pick the wrong hedge funds will be “patsies”. They will make less money than those who pick the right ones.
- June 7th: astonishingly, pension funds who bought more equities than bonds did better in the past 7 years. Good thing they didn’t listen to the Economist!
Buttonwood is clearly written by Eeyore, albeit an Eeyore with a prediliction to ghoulish schadenfreude. I can’t believe I read all that stuff.
For me, Baruch, the Economist magazine has long been something that drives me up the wall. I don’t mind the classical liberal schtick, in fact I quite like it. But offsetting that is the smug certainty of the self-selecting Oxbridge PPE brigade, the style that pretends to editorialise but which in reality is mostly on one hand, on the other hand equivocational fence-sitting, the anonymity of the authors, the exaggerated respect we are supposed to have for it as an institution. . . oh, so many things. I know Bento loves it. Never mind endorsing Dubya in 2000 and supported the war in Iraq, for sheer grandiosity of error I don’t think you can beat the fact that the Economist advised staying out of the great run-up in stocks in the 1990s (it was a bubble, you know), up until November 1999, when in an abrupt volte-face they determined everything was different this time, and we should buy the heck out of the Nasdaq. That’s right: they kept you out of the best bull market in the history of the world, then gave you 3 months to deploy your money into the worst bear market the world had yet seen. If I did that I’d certainly have lost all my clients’ money and deservedly got the sack. The Economist shrugs it off, keeps on opining authoritatively about stockmarkets, then starts writing Buttonwood. Shameless.