Hi Guys,
The doomsday prophets are a persistent lot. These guys never stop peddling their seeds of complete or partial destruction. These doomsday scenarios reach back to Biblical times.
Many more recent examples exist.
Remember when liberal doomsayer professor Paul Ehrlich predicted widespread food shortages and famine caused by unfettered population explosion. His best selling 1968 book is called “The Population Bomb”.
He said: “The battle to feed humanity is over. In the 1970s, the world will undergo famines. Hundreds of millions of people are going to starve to death in spite of any crash programs embarked upon now. Population control is the only answer.”
It never happened because of negative feedback loops that limited damage.
In that same direction, the Club of Rome (circa 1970s) doomsday scientists forecasted population induced shortages in food and energy. The Club generated considerable global attention with its report titled “The Limits of Growth”.
Wrong again. Do you see a pattern developing about now. Scientist are about as good at forecasting the future as we are. A fundamental error we all make is to anticipate a linear world with fixed relationships. It doesn’t work that way.
In 1970 Kenneth E.F. Watt wrote of an impending ice age. He said: “If present trends continue, the world will be … eleven degrees colder by the year 2000. This is about twice what it would take to put us in an ice age.”
Again, it never happened. The media contributed to these exaggerated projections with many dire articles that were designed to attract attention and sell copies.
Here is a Link to a typical Newsweek article from that period:
http://denisdutton.com/cooling_world.htmOne thing is surely a certainty. The doomsday prophets always seem to secure media attention. Catastrophe forecasts sell big-time.
An opinion article in the April 10 edition of the WSJ captured my attention today. It suggests the fallacy of such doomsday projections, their motivations and their dangers. The article is titled “The Ideology of Catastrophe”. Unfortunately, you need to subscribe to the journal to gain direct access. Here is an alternate route that provides immediate access:
http://thegwpf.org/opinion-pros-a-cons/5417-pascal-bruckner-the-ideology-of-catastrophe.htmlEnjoy.
Much market fears have bubbled to the surface within the last week. I’m sure some MFO members have doubts about the global economy and our financial marketplaces. That’s not bad since some of these doubts are well reasoned and reasonable. But doubts equate to uncertainty, and uncertainty can generate fear when uncontrolled. All these dismal events are interconnected in a tangle that is unfathomable because of these complex connections.
But history has demonstrated that this connectivity is made in a way that has negative feedback loops. These negative feedback loops dampen oscillations and eventually produce a semi-stable equilibrium. Trees do not grow to the heavens; limitations kick-in.
As Mark Twain said: “Courage is resistance to fear, mastery of fear, not absence of fear.”
Martin Luther King Jr. contributed the following observation: “We must build dikes of courage to hold back the flood of fear.“
More recently Warren Buffett added this insight: “Americans are in a cycle of fear which leads to people not wanting to spend and not wanting to make investments, and that leads to more fear. We'll break out of it. It takes time.”
So don’t panic. Take the time to engage both the reflexive (fast) and the reflective (slow) portions of your brain. Be patient, be prudent, and be persistent. Especially, be brave.
As always, I encourage and welcome your participation in these discussions.
I have voluntarily been removed from the news cycle for several weeks now; I was on an enjoyable ocean cruise holiday and elected to isolate myself. If I made errors in this submittal please blame my lack of recent participation in this forum. I need some practice to reestablish my form.
Best Regards.
Comments
I think it's remarkable how much many people are so rabidly against a little realism - apparently people would like to always be presented with good news and hear that everything is going great in the global economy. Sounds like a nice world, but it's not - and this should probably be apparent - a realistic one.
People who are negative may say things people don't want to hear, but it's amazing to me that they are portrayed by many as downright villain-esque. If Marc Faber is a "villain", at least he's amusing in his honesty about the situation we face - from a few years ago: "The federal government is sending each of us a $600 rebate. If we spend that money at Wal-Mart, the money goes to China. If we spend it on gasoline it goes to the Arabs. If we buy a computer it will go to India. If we purchase fruit and vegetables it will go to Mexico, Honduras and Guatemala. If we purchase a good car it will go to Germany. If we purchase useless crap it will go to Taiwan and none of it will help the American economy. The only way to keep that money here at home is to spend it on prostitutes and beer, since these are the only products still produced in US. I've been doing my part."
Many of Faber's negative statements are certainly not cheery, but I think they are well-researched and in many cases thought-provoking looks at big picture issues. Or amusing (when asked for portfolio advice last Summer on a CNBC interview, he told the commentator he would have to know the individual situation - married, single or how many girlfriends? He explains to them that, "It leads to a huge cash flow drain if you have too many girlfriends.") For all of the discussion of Faber as gloomy, he did call the bottom in 2009, although his initial call didn't get the length of the rally right (and he did call the correction in Gold...correctly.) Like any other commentator, take it or leave it, but if one is open to listen (and many aren't, because "booo, hiss, CNBC told me he's a "permabear!"), they may pick up more than a few worthwhile notes about macro issues. Faber - for those willing to actually listen - isn't always negative, either.
Jim Grant is another instance where people aren't going to always like what he says, but his presentations are well worth a listen. Jim Rogers offers some good broader views in longer interviews, but generally says the same thing in short CNBC clips.
The people who were negative and screaming about the housing situation before 2008 were ridiculed. People who said to buy gold a decade ago were called nuts (or things far less polite) and those same people were still treated in the same fashion several years later. People on CNBC these days still have one negative comment and are often shouted down by anchors. Some negativity - IF presented with reasoning and evidence, which should also be expected with optimism - and balance is healthy.
Are there some people who are consistently negative? Sure. However, there are some people whose constant spin towards the positive can be harmful, as well. There are also many who go on financial media talking their own book, such as the incident with Jeff Saut (who I do actually like in longer interviews) from Raymond James the other day on CNBC (http://www.zerohedge.com/news/jeff-sauts-permabullishness-just-cost-raymond-james-hundreds-thousands-lost-revenue). You talk about doomsday prophets: there's maybe a handful of them, and they're far outnumbered by the cheerleaders who, like real estate agents, will never tell you it's a bad time to buy a stock.
The people on CNBC who are always pushing momentum stocks like Travelzoo (a company whose shares lost 75% of their value in the last year and yet still has a 100+ p/e, and who now is apparently trying to sell itself), Sodastream (which had a huge CNBC segment with Cramer and Herb Greenberg taste testing right before...) and Netflix are, funnily enough, never questioned after those stocks inevitably crash. They may not be doomsday prophets, but they probably caused more than a bit of harm to those willing to listen (and, not surprisingly, they will be invited back on and will never be questioned about their calls.) Or all the pumping of Groupon to what's left of the retail crowd, which was followed by dumping after the company turned out to be one accounting mess after another.
All stuff that can be sold to the public as the "nextest, greatest, bestest" and promoted for the escalator ride up that suddenly turns into the elevator ride down to reality. Businesses once thought to be fads can endure and prove others wrong with great leadership (Starbucks and Howard Schultz), but there seems like fewer and fewer Howard Schultzes.
It's a consistent cycle of not wanting to face some of the genuine structural issues our economy still struggles with, and instead throw easy money at the problem in the hopes it goes away. The money being thrown at the issues these days isn't getting the returns it once did. We need to make some hard decisions in this country, but do not have the political will to do so, and it would be uncomfortable and unpleasant and no one wants that.
Could the market keep going up? Sure. This may be a pause before further upside. However, those who believe we've really learned from 2008 are - in my opinion - deluding themselves. This country has absolutely not learned from (recent OR otherwise) history and, sooner than later, is doomed to repeat it. When we have another crisis, I'd be curious how we handle it - prop everyone up again and go another several trillion in debt?
I'm not selling nor panicking nor do I think the world is ending. Oddly, I actually find myself feeling more comfortable with more allocation than before to individual stocks than funds (although I still have funds), as I find myself more comfortable with the long-term idea of individual businesses I find exciting and/or particularly well-managed/reasonably valued, such as Asian conglomerate Jardine Matheson or US holding company Loews, which hasn't done terribly well in recent years (but I do have confidence in management over the longer-term) or something like Brookfield Infrastructure Partners, which is a particularly unique investment.
However, I do think that this country is in the midst of a slow decline and a decline in the standard of living that could easily accelerate with further policy mistakes. Future generations will get the bill. That doesn't mean that the market couldn't keep going up, but I think the social and economic issues that we face today and that have gotten progressively worse over the last several years will probably not improve.
Still, to ignore some of the serious issues in the world that haven't gone anywhere and that have only been papered over by easy monetary policy is to be done at one's own risk. You have a market that will have a hissy fit at the threat of no more QE - not exactly a surprise when we've taken the fiscal policy of curing alcoholism with more alcohol. I'd also be curious how much money was freed up by people not paying their mortgage and yet allowed to live in houses for as much as a year or two+.
While my view of Apple's products has softened, I think I remain skeptical about how sustainable it is for them to be such a large part of the economy - that Apple has a larger market cap than the entire US retail sector (http://www.zerohedge.com/news/its-official-apple-now-bigger-entire-us-retail-sector)
"More recently Warren Buffett added this insight: “Americans are in a cycle of fear which leads to people not wanting to spend and not wanting to make investments, and that leads to more fear. We'll break out of it. It takes time.”
I think there's an issue with trust and confidence with the financial system, as well as other problems people face today. In terms of confidence, I mean, the average person looks and sees no one got in trouble for the financial crisis and it still happens today - I mean, look at the Jon Corzine situation. The MF Global situation is horrific for confidence, and wasn't handled well.
You've lost many retail investors for years (and probably turned off more than a few of a younger generation) and there's going to be older generations looking to retire and sell (as discussed in detail from the excellent article from Rob Arnott a few weeks ago.) There are considerable headwinds, and I think it's rather remarkable the level that the average person has stepped away from the stock market. I'd be curious to see the next ICI numbers about mutual fund outflows.
You note:
"The doomsday prophets are a persistent lot. These guys never stop peddling their seeds of complete or partial destruction. These doomsday scenarios reach back to Biblical times.
In that same direction, the Club of Rome (circa 1970s) doomsday scientists forecasted population induced shortages in food and energy. The Club generated considerable global attention with its report titled “The Limits of Growth”.
Wrong again. Do you see a pattern developing about now. Scientist are about as good at forecasting the future as we are. A fundamental error we all make is to anticipate a linear world with fixed relationships. It doesn’t work that way."
>>>>>As for the Club of Rome and numerous other "clubs", I am skeptical about whether they are so angelic. I can not find this note from the Club of Rome, around 2008, but it was in this general nature of the wording.
"According to Richard Haass, a system of world government must be created and sovereignty eliminated in order to fight global warming and terrorism, both invented as the Club of Rome suggested. “Some governments are prepared to give up elements of sovereignty to address the threat of global climate change,” writes Haass. “The goal should be to redefine sovereignty for the era of globalization, to find a balance between a world of fully sovereign states and an international system of either world government or anarchy.” <<<<<
"One thing is surely a certainty. The doomsday prophets always seem to secure media attention. Catastrophe forecasts sell big-time.
An opinion article in the April 10 edition of the WSJ captured my attention today. It suggests the fallacy of such doomsday projections, their motivations and their dangers. The article is titled “The Ideology of Catastrophe”."
>>>>>I have not read the article, and not able to comment about this. <<<<<
"Much market fears have bubbled to the surface within the last week. I’m sure some MFO members have doubts about the global economy and our financial marketplaces. That’s not bad since some of these doubts are well reasoned and reasonable. But doubts equate to uncertainty, and uncertainty can generate fear when uncontrolled. All these dismal events are interconnected in a tangle that is unfathomable because of these complex connections."
>>>>>Very complex indeed. One has to rely upon every fiber of what they know about themselves, how they react to the known and newly discovered information and try their best to sort what is of value and as close to fact as they are able to determine from whatever source. The sources should be as varied as possible to help obtain a perspective. A related view would be that one can not neccessarily determine how right or left wing (including the zealots) a political may be without having the other extreme with which to measure against. Only then may one perhaps determine where the center line of the road lies when there is no marked center line, but only the deep ditch to the right and left of the roadside. <<<<<
"But history has demonstrated that this connectivity is made in a way that has negative feedback loops. These negative feedback loops dampen oscillations and eventually produce a semi-stable equilibrium."
>>>>>"semi-stable equilibrium"......tis probably about where many things economic are parked; let alone the mood of the citizens. <<<<<
"As Mark Twain said: “Courage is resistance to fear, mastery of fear, not absence of fear.”"
>>>>>Yup ! <<<<<
"More recently Warren Buffett added this insight: “Americans are in a cycle of fear which leads to people not wanting to spend and not wanting to make investments, and that leads to more fear. We'll break out of it. It takes time.”"
>>>>>Well, Warren; some folks are investing with not spending. I know there are folks who have "seen the light" and have begun to sort out and understand the difference between wants and needs. This is investing, too. Just not in the terms we discuss here. And yes, some of this is about time. <<<<<
Much more could be written. But, I have expressed my feelings numerous times about what I consider to be "reality bites". There exists many problems that have nothing to do with future forecasting. They are here and now.
Time for the pillow at this house.
Regards,
Catch
A quote from a blog I read:
"But according to game theory, the closer you get to perfect, peaceful cooperation (the opposite of dooms day), the higher the rewards are for cheating. Look at Wall Street, which could never amass that much wealth if they were in some third-world dictatorship. Even if the dictator takes the entire pie, the pie is just smaller. Americans work ourselves to death because we believe we’ll see the benefits. People who expect to be cheated don’t work nearly as hard. At least that’s my experience, with students and in regular life. I should find an economist to talk to about that."
Getting back to book pedaling:
John Mauldin's financial book "The End Game" of a global debt super cycle. Here's John at the Singularity Summit in 2011:
Over the weekend Bob Edwards interviewed Elaine Pagels, religious scholar, about her new book: "Revelations: Visions, Prophecy, & Politics in the Book of Revelation". Her research examines where these dooms day writings came from and how they were embraced by their societies and still are.
Here's Elaine Pagel's presentation on the topic...(scroll down to March 26...about the eighth video):
http://www.cappscenter.ucsb.edu/videos/2007-2008/
While I tend to be a person who is a "glass half full" guy rather than "half-empty", I have been around enough to know nothing is ever as good or as bad as it may seem. Are there reasons to be concerned? Of course there are, but they are not reasons, for me at least, to become paralyzed and sit on the sidelines.
Thank you all for participating in the “Doomsday Prophets” discussion. Your contributions were invaluable in fully expanding a necessary diverse perspective. Your perceptions and references added multiple dimensions to my narrow viewpoint.
I am constantly intrigued by the one event wisdom of our most renown clairvoyants. At best, they seem to be one-trick ponies who never (or almost never) repeat their initial success. At worst, they persist in their faulty forecasts and cause much harm among adoring and sometimes clueless camp followers.
For the purposes of this posting, I’ll restrict my comments to the investment world, and not address global false prophets in their many varied guises.
Within the investment world several decades ago, Joe Granville had legions of loyal followers who religiously subscribed to his recommendations after some early 1980s successes. He is a great showman. Soon after, his crystal ball shattered. Even after decades of failed stock selections since that period, he retains a dedicated, albeit much smaller, cohort. His mutual fund work has been a dismal disappointment according to the Hulbert ranking system.
Elaine Garzarelli maintained a high guru profile after her accurate Black Monday 1987 market collapse prediction even after many years of stunningly inaccurate predictions thereafter. To her credit she has continuously attempted to improve her market and sector prediction methods by constantly updating a multifactor computer model that is empirically based. At best, her success is very muted.
We seem to need and seek heroes. That’s dangerous to our financial health since true heroes in the financial world don’t usually persist.
To illustrate the paucity of market wizards in the current financial community, just scan the cumulative record of the scores of experts listed in CXO Advisory Group’s guru listing. Here is the Link that accesses that list:
http://www.cxoadvisory.com/gurus/
The CXO tabulation reviews a wide variety of market wizards and pundits. The most striking aspect of the CXO guru list is the unimpressive mundane record that the proclaimed experts managed to accumulate over long periods. Since a final judgment is limited to an either Up or Down assessment, a 50 % floor essentially means no insightfulness whatsoever. That’s merely fair coin flip territory.
It is amazing how many of the gurus are well below the coin-flip line. Yet many acknowledged experts have been mired below that minimalist line for the entire period that I have monitored the CXO website.
Most of the entries in the CXO listing hover about the 50 % success ratio. Only a few managed to achieve the 60 % plateau. Nobody has currently cracked the 70 % barrier. On the bottom of this totem pole, a number of semi-famous investment names are below the 30 % accuracy mark. Overall, this is a shameful showing of ineptitude.
I recommend that you peruse the listing to verify if any experts that you esteem earned that trust. A meaningful acid test is the guru’s success ratio. Everyone has dry spells, but a value below 40 % should be a matter for reassessment, especially if it has been that way for an extended timeframe.
Yet many gurus retain their guru ranking with records well below the 50 % threshold. It is puzzling why the investment community still awards them a guru status given such undistinguished scores. Public perception and publicity is a partial answer; perception is not true reality; victory (forecasts that generate profitable investments) is the true measure.
Once again, thank you for your fine submittals that greatly enhanced the value of my original posting. I appreciate your efforts.
Best Wishes.