Sunday, December 29, 2013

Mainstream Hypocrite of the Year Award

December 20, 2013
7 things you should have learned in 2013 -- but didn't

2. Forecasting doesn't work

Sure, some forecasters get it right. But nobody gets it right frequently enough to be depended upon — so stop using investment bank research as your primary source for buy or sell calls. It will only end in disappointment.

If there is one thing I have learned from this article it is that forecasting doesn't work. Got it.

4. Be careful with long-term bond funds

Rates have rolled back a bit, but you can bet they will rise again at some point in 2014.

This is a bond market forecast intended to entice us into gambling ("you can bet"). If we can safely bet that rates will rise again at some point in 2014, then shorting bond funds is a sure thing. Free money! They are practically giving it away!

7.You can't win if you don't play

Oh yeah, and the S&P is up 25 percent, its best year since 2003.

You think it's really all going to stop NOW, after what we've been through?

This is a stock market forecast that uses uppercase ("NOW") inside a rhetorical question as an emotional debate tactic. Since the S&P 500 has risen dramatically, it is implied that it must continue to rise. Gambling on the S&P 500 is therefore a sure thing. Free money! They are practically giving it away!

"I always say, buy high and sell higher." - Suze Orman, April 2000

In a world where "forecasting doesn't work", I sure hope hindsight is kind to his sure thing bond market forecast and his sure thing stock market forecast.

I'm also a bit surprised that he didn't give us a sure thing climate change forecast for 2014 as well to round out the list. Perhaps weather is not his area of prophecy expertise? Perhaps the all-knowing mainstream Nostradamus sees an ice age coming and he's too afraid to share it with us lest we panic? Perhaps there's just no free money in amazingly accurate climate predictions? The world may never know!

In any event, I sure love the hypocrisy here. There is no way we could have learned all 7 things in 2013. We'd be fools to believe that forecasting doesn't work while simultaneously gambling on two of his forecasts.

Is it an elaborate PARADOX to see if we're paying attention?

Uppercase inside a rhetorical question as an emotional debate tactic for the win! Yes!

This is not investment advice. Seriously. I'd be the last person to suggest I knew for sure where bond yields and stock prices are headed in 2014. As a bond investor, I'm actually hoping he's right and that real rates rise in 2014 (and stay elevated). I could then reinvest at higher rates as my bonds mature. I'm not exactly holding my breath over the long run though. This is one long-term trend that has not been kind to procrastinators. And he, with his omniscient wisdom, has decided to bet against it. Good luck!

I'm not quite done yet. Here's a bonus heckle.

3. Stop buying negative yield TIPS

But please don't let your hyperventilation about hyperinflation lose you money — again — in 2014.

Anyone buying TIPS for hyperinflation defense doesn't understand the first thing about TIPS. TIPS would be a horrible investment during hyperinflation.

1. When held outside a retirement account, you'd have to pay massive taxes on the hyperinflationary gains each and every year. Those taxes could easily ruin you financially over time. Keep in mind that you might very well be forced to sell TIPS bonds just to pay the taxes on them. Ouch.

2. There is a lag. TIPS don't respond instantly to rising inflation. Inflation numbers only come out once a month. Hyperinflation could easily mean that you'd wish they came out hourly. Seriously. Think this through. During extreme hyperinflation, are you really going to be happy getting compensated for what milk prices were a month ago? I think not.

I certainly do not buy long-term TIPS as a hyperinflation defense. That's just being silly. I like TIPS as a real yield defense. I believed and continue to believe that it will be harder and harder to make money off of money in the future. That implies real yields fall. It is actually one of my better calls since starting this blog, cherry-picked 2013 notwithstanding. There were no negative yield TIPS when I was doing most of my buying (before the Great Recession). There certainly are now! It's almost like we're stuck in ZIRP. Go figure.

Once again, this is not investment advice. I do not claim to know the future with any certainty. I can say this though. As of 2004, I am risk averse over the long-term and no longer ever wish to swing for the fences. As a retiree, I have no job to fall back on if my "risk on" bets go against me.


Rob Dawg said...

Climate scientists exist to make financial analysts look good.

Stagflationary Mark said...

Rob Dawg,

If long-term trends continue, I predict a warm summer and a cool winter in the USA in 2014!

I doubt my climate research gets published though. Doesn't offer enough shock value. :)

Rob Dawg said...

I predict a lot of money will be made in the social networking bubble and then even more in the bust and I won't see any of it.

Stagflationary Mark said...

Rob Dawg,

I certainly won't see any of it either.

I don't even have a Facebook account. There was an amusing segment on the news yesterday.

A young girl was saying why she didn't like Facebook. She stated that the expectation was for her friends to tell her how pretty she is and hoped that the cute boys would notice her. The reality is that her relatives told her how much she looked like her mom, lol.

She made a very persuasive and well worded argument. In general, I think of my relatives as friends but I don't consider my friends to be relatives. Prefer not to mix them together!

Further, Facebook to me sounds way too much like a company granting you a pager. In theory, sounds kind of awesome to be thought so important. In practice, sounds kind of awful to be working 24/7! Thanks, but no thanks!

Stagflationary Mark said...

I'd also like to take this opportunity to sum up my investment in blogger over the past 6 years.

I've spent $0.00 to maintain this site and thousands of man-hours.

I've earned $0.00 in advertising income. As a courtesy to my readers, I have no intention of placing ads on my site unless forced. If forced, I'd probably stop altogether.

Lookin' good! I may not be pulling in the big bucks, but perhaps I can make it up on volume. Hahaha!

Anonymous said...

"As a courtesy to my readers, I have no intention of placing ads on my site....."

Your readers appreciate this very much , I'm sure.

I know I do.

EconomicDisconnect said...

The hypocrisy is endless, even from people I really respected. One uptrend and everyone is a genius and anyone with some reservations are fucking morons who think the end of the world is coming. In one breadth they tell you there is no inflation so the FED can stay on easy policy then they tell you to invest in stocks (their funds of course!) to avoid losses due to inflation??!! Like every other time until these morons and baby's are carted out feet first in the next collapse nothing will ever change.

Troy said...

is what they mean by no inflation.

No wage inflation, no inflation, just reallocation, er, 'substitution'.

Just read in the paper today that beef production is going to decline 5% YOY.

"As production declines and prices rise, per capita beef consumption continues to fall. Per capita consumption in 2014 was projected by the USDA at 54 lbs. (retail weight), down 4.8 percent from 2013, which was forecast down 1.2 percent from 2012. Per capita pork and broiler consumption were forecast to increase both years."

54 pounds a year . . . hmm, a pound a week. That's about what I cook up I guess, counting hotdogs.

But for every man, woman, and child, damn. We may not outnumber China and India, but we probably outweigh them!

Stagflationary Mark said...


I guess we'll all just have to miss out on all those ads telling us how we should invest and what we should consume. We'll survive somehow I'm sure. ;)

Stagflationary Mark said...


Tell us what you really think. Don't hold back. ;)

In all seriousness, yeah!!

Stagflationary Mark said...


There's been a noticeable lack of all beef hotdog sales lately but plenty of "meat" hotdog sales. I have not substituted to the latter but instead am eating more chicken. Go figure.

It's no big deal to me. Fortunately, I generally prefer chicken anyway.

I cringe at the thought of what the growing poor population (as seen in food stamp participation) are substituting. Amazingly, can still get a pound of dry spaghetti for a dollar on sale. Not exactly filled with nutrition though.

Fritz_O said...

The hypocrisy is endless...nothing will ever change.

Someone's coppin' a 'tude!

And I don't blame them one bit.