Mindless and Clueless
Courtesy of Michael Panzner at Financial Armageddon
Admittedly, I’ve been somewhat perplexed. I keep wondering what planet — or illicit substances — equity traders are on. You know, the ones who seem to think that every market pullback, no matter what the reason, is a buying opportunity, despite an increasingly shaky fundamental, technical, and macroeconomic backdrop that is hard to miss.
But I think I may have the answer. If the following post, ‘"Morning Rant: What ARE [U.S. Economists] Looking At?’" from the Wall Street Journal‘s Real Time Economics blog is anything to go by, maybe these mindless buy-bots have been relying on the insights of economic and other "experts" who are even more clueless than they are:
Economists and policymakers, brace yourselves: the eye of the storm has passed and the headwinds are now gathering for another brutal battering by investors, politicians and the broader public. We’ll turn the mike over to T.J. Marta, founder and market strategist with Marta on the Markets, whose morning note today succinctly sums up sentiment at the moment. Says Mr. Marta:
“In light of the recent developments in Greece, the Fed’s Dennis Lockhart was sheepish at a conference yesterday that had the stated theme, ‘after the crisis’. He admitted that the theme was chosen earlier in the year when Europe’s sovereign debt troubles were not fully anticipated. In defense of the folks choosing the title, the conference was about the mortgage crisis, not general financial markets.
“However, Lockhart’s admission as a member of the Fed about not fully anticipating sovereign issues is telling nonetheless. So we’ve got at least one member of the Fed admitting he didn’t appreciate the issue. We’d throw [Jeffrey] Lacker and [Thomas] Hoenig in the same pile. And it’s not just the Fed members. This week, a major U.S. bank [Morgan Stanley] backtracked on its rate call, also using the cover of new developments in Greece. We recently went to a conference at which three U.S. economists from three major banks spoke, figuratively tripping over each other in calling for the first Fed rate hike by [the third quarter]. None mentioned Greece. None mentioned U.S. federal fiscal policy uncertainty, especially with the November elections. None mentioned the woes of U.S. state and local governments, holes in the budgets of which keep opening up. None mentioned the potential effects of Chinese tightening, although when pressed by a question from the audience, one economist did manage to stammer some lip service about the potential impact on the U.S. economy (his rambling told us he had not considered the impact in more than passing.)
“It seems to us that U.S. economists in positions of great power to shape public policy and market expectations are failing to do their job. They seem to be stuck in U.S.- and econometrics-as-the-center-of-the-universe paradigms. We’d caution clients against following the shtick of economists calling for a steady-as-she-goes economic recovery and strongly urge them to deeply probe representatives espousing these views. Perhaps more importantly, we’d caution clients to earnestly consider the fat tail of a double dip, or at least a below consensus recovery in determining one’s investment strategy.”
Yikes. Add in the Senate’s vote on Tuesday to force the Federal Reserve to disclose specific details of its actions during the financial crisis (part of the “audit the Fed” push), and it may now only be a matter of time before Fed Chairman Ben Bernanke is back on “60 Minutes,” trying to win back the hearts and minds of a disillusioned public.
