Posted on 07/12/2007 2:00:22 PM PDT by SirLinksalot
IF YOU WATCH CNBC, you probably wonder how purported "experts" can disagree so sharply. Are we in a bull market or a bear market? Are interest rates heading higher or lower? Is the economy strong, or is it weak? There's always an expert to take any side of any financial question — and usually take it at the top of his lungs.
I'm one of those so-called experts. I appear on CNBC about once a week, usually on a panel with other experts.
We experts are chosen deliberately by CNBC's producers to have divergent opinions, so that viewers can see all sides of a question. Markets are made up of people with different opinions. They have to be, if you think about it, otherwise buyers could never find sellers and sellers could never find buyers. So I guess it's only natural that there should be disagreement on any given question.
But the sharpness of the disagreements that you see on CNBC might be a little misleading. It's in the nature of CNBC's fast-action format to require us experts to condense our views, which are often quite complex and nuanced, into simple sound bites. And just as important, we experts all know that sharp disagreements make for more exciting shows.
In fact, while we're on the air, and one of the other experts is talking, it's not unusual at all to have one of the producers whisper to us through our concealed ear-pieces, egging us on to jump in. Controversy is good for ratings, to be sure.
So we experts try to express our opinion in a lively and colorful way. But speaking for myself, I can assure you that I've never once expressed an opinion that I didn't sincerely believe. I'm pretty sure the same thing is true for my fellow experts.
Which leads me to my real question of the day: How can some of the experts on CNBC actually believe some of the outright wrong and patently ridiculous things they say?
"Belief" is a funny thing. In human psychology, belief is the intersection of logic and emotion. It's not always clear what irrational or non-rational factors cause us to accept, discard, overweight, underweight and otherwise synthesize the facts before us in a belief. Sometimes we sincerely believe things without facts. Other times we believe things despite facts.
And when it comes to markets, finance and economics, facts are usually in short supply in the first place. After all, we're usually talking about making forecasts, which means not only struggling to interpret today's ambiguous facts but, beyond that, extrapolating them into an unknown future.
Many television experts, it seems, have learned to be permanently bullish. It makes sense, in a way. Stocks tend to go up more often than they go down. In an efficient market, that virtually must be true because stocks will always be priced to deliver a positive return. So anyone who is agnostic or unsure about the facts should be bullish as a default position: The odds are with you. That's probably as sensible a belief as anything else.
There's a smaller group of television experts who seem to be permanently bearish. They are making a serious conceptual error by taking this stance. They will be right occasionally, but then again so will the permanent bulls. The permanent bears will, in the nature of things, be wrong more often than they are right.
I think another thing that motivates the permanent bears, at least unconsciously, is a desire to stand out, to be different. In a world where most people are (correctly) bullish most of the time, being bearish is a way to distinguish yourself from the crowd. That way, if and when you end up being right, your prediction will have extra value because it was somewhat unique.
Don't underestimate the fan-mail factor either. One of the great satisfactions of being on television is all the email you get from viewers. My emails tend to come from people who are hopeful and independent. But the permanent bears must get emails from scared, dependent people who are huddled in fear that the world will end, eager to get the TV guru's advice on how to survive the pending catastrophe. If you want adoring fans to look up to you, then there's no better way to get that than to scare them out of their wits.
Then there's the book factor. Some of the permanent bears have written books, warning about this, that or the other pending catastrophe, crash, panic or Armageddon. And once you've written a book, you're locked in. You can't change your views until the book goes out of print. You're stuck on bearishness whether you like it or not.
So as you watch the experts on CNBC, keep all this in mind. We experts believe what we're saying, but sometimes our beliefs can be clouded by our all-too-human frailties.
Well, mostly. There is one exception. Me. And in my expert opinion, the bears — permanent and otherwise — are in for another big disappointment here. Consider the facts behind my belief. Earnings are cheap compared to interest rates, which are still low. The economy is re-accelerating and earnings are booming. Liquidity is plentiful. The Fed is on the sidelines.
And the best fact of all is the bears themselves. The very fact that they keep worrying fills me with confidence and optimism. They're always wrong, it seems. The only calamity they're going to get is the reputation damage of being wrong, once again.
Donald Luskin is chief investment officer of Trend Macrolytics, an economics consulting firm serving institutional investors. You may contact him at don@trendmacro.com.
Orwell had a word for it - DoubleThink.
I watched CNBC back in the 90s for humor, but I got tired of picking up broken ashtrays and cigar butts after every appearance by that menacing Wall Street gnome Larry Kudlow. Then after CNBC started pushing “Dow 36000” right before the imminent Nazdog crash, I knew the network had jumped the shark.
Maybe if the network displayed dancing hula girls in the foreground I might wander back.
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