Logic fallacies in the alt-financial media; More Zerohedge gloom and doom

All gloom, all the time

The Doomsday Scenario for the stock and housing bubbles is simple: the Fed’s magic fails. When dropping interest rates to zero and flooding the financial sector with loose money fail to ignite the economy and reflate the deflating bubbles, punters will realize the Fed’s magic only worked the first three times: three bubbles and the game is over.

So what happens when punters realize there won’t be a fourth bubble? They sell. Bids disappear because who’s dumb enough to bet (with Japan and Europe as lessons) that more liquidity and negative interest rates will magically work when zero interest rates didn’t move the needle?

Charles Hugh Smith – The Doomsday Scenario for the Stock and Housing Bubbles (February 27th)

I came across a Zerohedge article yesterday, which was just a repost of a Charles Hugh Smith article titled, The Doomsday Scenario for the Stock and Housing Bubbles. Mr. Smith is convinced that this latest round of monetary policy will not work and that the fourth time will finally look like desperation. This time, he is sure the stock and housing bubbles will pop. However, employing the argument from incredulity and extrapolating data using the gambler’s fallacy doesn’t make it so.

Concluding that because you can’t or refuse to believe something, it must not be true, improbable, or the argument must be flawed. This is a specific form of the argument from ignorance.

Argument from incredulity

 

The gambler’s fallacy refers to the tendency of individuals to erroneously believe that the onset of a particular random event [in this case the Great Buying Opportunity of 2008] is more or less likely to happen following another event or a series of events [another crash modeled after the previous one]. Logically, this line of thinking is incorrect; past events do not affect the probability that certain events will occur at a later time.

Gambler’s fallacy in investing – Investopedia

To keep apprised of the many poorly constructed alt-financial writings, I prefer to scan Zerohedge’s condensed bucket list of gloom and doom, because their editors purposely choose all the terrible writings that populate the alt-financial media. Any writer who receives traction on Zerohedge has been a dispenser of the worst financial advice, but it conforms to that predetermined confirmation bias. These writers get their notoriety, because of the gloom and doom they bestow on their readers. Each of these writers jumps the shark, continually upping the ante and displaying the backfire effect.

The GDP numbers that came out this morning seem to imply that the economy, which is on a permanent IV-drip, still continues to receive support. I see the U.S. Fed policy continuing to work. Imagine if rates go negative; asset prices will climb higher. The more dovish the Fed sounds the higher stocks climb. They have already broken out of their resistance channel and despite all the collapse talk, look ready to take out their old highs.

Lower mortgage rates already having an effect
The Fed manages the entire yield curve. Mortgage rates have dropped 50 bps and the Fed still is unwinding its balance sheet.

Here are the actual numbers from the National Association of Realtors.

As rents continue to escalate, gratis government social policy, prices continue to creep up. The latest NAR data confirm that the recent drop in mortgage rates has been felt around the nation and pending home sales have perked up.

Latent demand is much stronger than most economists theorize and a decade of severe under-building is taking its toll on buyer sanity.

Renters and those shut out of investing prefer Zerohedge

I am sure a higher than normal percentage of Zerohedge readers are renters and they are hoping Mr. Smith is correct. He conflates with that hard-wired gloom and doom confirmation bias. I have been following his writings for almost 15 years and this article could have been written over ten years ago. It makes for interesting reading, but the gamblers fallacy and argument from incredulity never make for profitable investing or correct predictions. He’s been wrong the past three times already and those who listened to him have their glass half-full… with tears.

I see no reason why these central bankers are losing control. Last decade’s manufactured crisis provided all the ammunition the elites needed to effectively gain control of the monetary system and global economy. Here’s where understanding the conspiracy for world government comes in handy. The elites would gain nothing if the system collapsed as their power base would be eroded. I reason that they gain much more by keeping this system intact until war and the dispensers of gloom and doom only assist in the agenda.