Biased?
I am frequently accused of having a negative or bearish bias.
Its a rhetorical ad hominem device used by those who will not (or cannot) address the substantive issues. They prefer the personal attack, the name calling rather then discuss the merits. Its an effective technique if you aren't on guard for it.
I am biased -- by the facts. To quote The Daily Show's Rob Corddry: "How does one report the facts in an unbiased way when the facts themselves are biased?"
I have used this space to highlight positive developments on
many occassions: We've been very upfront in suggesting that Oil prices --
even at $75 per barrel -- are not that expensive (it merely seems that
way after 25 years of below inflation prices increases), and that gasoline is a relative bargain. For the newbies to the site, we tipped energy in December 2003; Gold and Japan in 2004.
Pre-blog, back in October 2002, I flipped Bullish. And, I heard the same accusations of being a Perma-Bull. We recommended a lot of tech and telecom -- Apple at $15 pre-split, MicroMuse (since bought by IBM ~$10) at $1.50 -- and many specific names in banking, and they were, for the most part, home runs.
~~~
Yes, I am biased; no I make no pretensions to be objective -- other than common sense, pragmatism, and what my life experience has taught me.
I believe what my interpretation of the facts show, what my models lead me to believe. I have an opinion, a perspective, a point of view.
Just as there is a difference between "Objective" and Ideological;" so too there is a difference between objective and neutral.
Friday, March 30, 2007 | 02:30 PM | Permalink
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Nice post. As per your note, are you shorting the market or staying cash now?
Posted by: ManhattanGuy | Mar 30, 2007 3:02:45 PM
Bravo!!
You tell them B-
Michael Schumacher
Posted by: Michael Schumacher | Mar 30, 2007 3:09:39 PM
One thing I think everyone who reads this blog should take away is that we are ALL at the mercy of our info. Whether or not we are biased is just one more layer of the onion of truth. So many wrinkles get added to the truth by the time most people hear it.The avg weight of the grain of salt required with almost every info channel grows faster than M3.
Posted by: KP | Mar 30, 2007 3:14:53 PM
Of course one needs to have an opinion...if you didn't, there wouldn't be much point blogging (or investing.) By the same token, I believe that it's important to view incoming data points through as objective a lens as possible, rather than through the prism of one's existing opinion.
There is a tremendous amount of noise in most of the datapoints (economic, price, company news) available to financial market participants, so of course it's wise to filter that out, insofar as possible. However, assuming every contrary datapoint is simply noise can potentially lead to missed signals...which is why it's important to examine data objectively. (I am speaking in generalities here, not leveling accusations at Barry or anyone else.)
To quote JM Keynes: "When the facts change, I change my mind. What do you do, sir?"
Posted by: Macro Man | Mar 30, 2007 3:23:39 PM
Here are some facts from today's income report. Typically the amount of disposable personable income devoted to interest payments (not including mortgages as that is an 'investment') are between 2.0% and 2.5%. Any amount of significant time at or above 2.5% means a tightening consumer.
2005: 2.317%
2006: 2.418%
1/07: 2.534%
2/07: 2.544%
But income went up .6 and spending went up .6 so it doesn't matter if there is other information in the report.
Posted by: Josh | Mar 30, 2007 3:32:51 PM
Kudos Barry.
Are the markets supposed to be pc?
Are we supposed to please everyone all the time?
Dealing with the markets is more like surfing than trying to create waves by bellyflopping into the pool.
Ever notice how we never see gracefull and bellyflop in the same sentence?
Posted by: alexd | Mar 30, 2007 3:42:07 PM
Barry,
Cheers I've been looking for a site like this for a while. Was sick of hearing how great everything is meanwhile the numbers were saying different. Keep it up
Costa
Posted by: costa | Mar 30, 2007 3:47:48 PM
It is indeed the most difficult thing to do emotionally - to remain an objective observer of the markets once an investment position is established. Once you're long, you WANT the good news; shorting brings reveling in the negative. Keeping these emotions in check is one of the qualities that separate good investors from the rest. IMHO.
Small Investor Chronicles
Posted by: Alex Khenkin | Mar 30, 2007 4:08:41 PM
Barry - absolutely a great site. I really appreciate the great perspective and intellect that you, and the other writers like you, bring to blogging. I don't know why twits visit the good sites like yours, it really serves no purpose for them.
Posted by: Rick Hanley | Mar 30, 2007 4:08:55 PM
Barry: keep up the good work!!
I saw Ned Davis give a speach and I believe he said it best. This is how he navigates the markets: 1) be data centric in your approach; 2) be disciplined -i.e., follow your systems; 3) be flexible.
Huh? Aren't #2 and #3 diametrically opposed? And the answer is of course they are but he wasn't trying to do the double talk.
Basically, use the data, be disciplined to follow the data, and if you want to over ride your system (i.e. be flexible) know when and where you will be wrong.
In other words, don't stray too far from your strategy!
Posted by: Guy Lerner | Mar 30, 2007 4:11:13 PM
Barry,
Great post. We all have some bias built in. I would be a dull world if we didn't. Thesis-antithis-synthasis. (forgive the spelling).
Posted by: Ross | Mar 30, 2007 4:17:47 PM
The first rule of disinformation is to scapegoat your adversaries with the very behavior you yourself have been engaging in (surreptitiously or not) and are NOW trying to disassociate yourself from.
The money-for-nuthin', chicks-for-free cheerleaders will continue to get more desparate and in short-order be accuse you of much worse things than being "biased" ;-)
Personally I can't wait for the party to be over and the emperor to be left alone on the dance floor butt naked!
Posted by: TaZ | Mar 30, 2007 4:30:33 PM
By the way, a while back, when thinking about the few twits that visit even the great sites, I thought of an option.
We could create a domain called dot stu (.stu) where the twits could safely congregate and blow smoke up eachother's butts or whatever twits do in groups when no one is looking.
In any case, by definition the twits don't fall for reason. The good news is that the vast majority of your readers are good, intelligent people and are never swayed by the twits. We just grin and bear it as we know you have to.
Posted by: Rick Hanley | Mar 30, 2007 4:30:56 PM
When facts can be revised they are not facts- merely impressions. "Facts" do not stand alone nut require a schema to contain them. The schema is a system of relationships that are debatable for the non doctrinaire. When all is said and done you have very little as the future can't be factored in with certitude- or there'd be no market.......That's why Barry's skepticism is so necessary.
Posted by: zell | Mar 30, 2007 4:31:46 PM
"For the newbies to the site, we tipped energy in December 2003; Gold and Japan in 2004.
Pre-blog, back in October 2002, I flipped Bullish. And, I heard the same accusations of being a Perma-Bull. We recommended a lot of tech and telecom -- Apple at $15 pre-split, MicroMuse (since bought by IBM ~$10) at $1.50 -- and many specific names in banking, and they were, for the most part, home runs."
now tell them about your Dow 7000 for 2006 prediction and the whole lot that were strike outs.
If you only tell them about the positive results you aren't informing. You are advertising.
~~~
BR:
Since you brought it up -- it was 6800, not 7000 --
But as I wrote in both Business Week and the Cult of the Bear series, we would have to make new highs BEFORE THE CRASH. The levels I mentioned were the Dow topping out around 11,800, Nasdaq at 2620, and SPX 1350. -- Those levels were pretty damn good, and very few people were making a Bulllish call before the fall.
Here's the Cult of the Bear excerpt:
Before the Fall: With everyone so focused on the bearish year-end forecast, many have overlooked my expectations for early 2006. As the Business Week survey shows, my first half Nasdaq prediction of 2620 was the single most bullish in the group, while my mid-year S&P call of 1350 was in the top 10 of nearly 80 forecasters. I also forecast Dow 11,800 by mid-year. (For the record, the survey was conducted in early December.)
Why the bull call before the fall? Because that's how market tops get made: In the 12 months leading up to the October 1987 highs, the Dow ran from 1800 to 2700 (a 50% gain), while the S&P 500 sprinted from under 240 to about 340 (about 42%). From October 1999 to March 2000, the Nasdaq nearly doubled. Although I don't expect anywhere near those gains in the first half of 2006, the pattern could be quite similar: A leap to new highs on some widely held assumption, which subsequently turns out to be false.
~~~
I never understand why guys like you always seem to ignore that; Its just plain weird, but hey, its your choice to believe what you want. If you want to ignore half of any article, I guess thats your choice.
Posted by: forestfortrees | Mar 30, 2007 4:41:24 PM
"now tell them about your Dow 7000..."
He's pointing out instances in which he was bullish.... bearish calls (right or wrong) aren't relevant to the topic of this post.
Posted by: dn | Mar 30, 2007 4:54:38 PM
"now tell them about your Dow 7000 for 2006 prediction and the whole lot that were strike outs."
Economic reality seems to be easily bent by the Central Bankers and the Plunge Protection Team, which have been artificially defying economic laws of gravity since at least 2006 - Do you honestly think the Dow is worth more than 7000, based on PEs and future economic conditions?
"No one ever went broke underestimating the intelligence of the American people." - PT Barnum
Posted by: TaZ | Mar 30, 2007 5:09:34 PM
Please, Barry, stop confusing us with facts. The plain truth is that markets always go up, the Fed is in control, and there is no such thing as risk.
Posted by: Winston Munn | Mar 30, 2007 5:15:34 PM
It isn't so much that you don't change your mind, but while you are bearish you seem to see (post) only one side of the story. You scrutinize positive economic data until it looks bad and accept whatever bad data prints at face value. Given this behavior, people aren't wrong to call your posts biased.
This doesn't mean your actual thought process is biased (I assume you don't post everything you think) or that averaging your posts with mainstream media doesn't produce a much more accurate picture of the world than MSM alone, but from the way you espouse your viewpoint it would not be unreasonable to suspect that you suffer from confirmation bias.
~~~
BR: Don't we all? Also, I am guilty of anchoring, selective perception, selective retention, and a whole host of other cognitive issues.
But what I post on is typically pushback from the nonsense I read -- like the original Q4 GDP at 3.5% (hmmm, what happened to that one?)
Posted by: Agent00yak | Mar 30, 2007 5:24:40 PM
Forestfortrees, I thought your claim that Barry called for the Dow to end 2006 at 7000 was a misprint.
A little searching unearthed this undiscussed gem:
http://tinyurl.com/2ue4ku
Yikes! That's not a prediction for 7000, it looks more like 6800. If my money manager had made a prediction like that which didn't pan out, he'd be history. Good thing I don't listen to "experts" and their opinions, and run my own money myself.
That was one amazingly bad bear call - it was off by only 5,600 points. I don't think there's any other way to explain it away except that the assumptions which went into making the decision were completely, totally, 100% wrong.
Posted by: Nova Law | Mar 30, 2007 5:26:33 PM
Does anyone have a perma scorecard?
perma-bear: Roubini
perma-bull: Cramer
perma-deflation: Shilling
perma-inflation: Luskin
perma-sunshine: Laffer
perma-gloom: Reich
perma-Golidilocks: Kudlow
perma-gold: too many to list
Posted by: MAS (San Diego) | Mar 30, 2007 5:26:59 PM
I'll repeat my point again in this thread...
There is an unusually hostility of late in the comments section that should end. This has always been a fun place to post ideas (and tease the regulars when need be) and it should stay that way. The regular posters here can do a lot toward moderating their peers and not escalating matters.
Please engage in a civilized debate of ideas.
Posted by: rebound | Mar 30, 2007 5:31:57 PM
As the Talking Heads once said, facts just twist the truth around. You know, I think Wall St succumbs to its own memes in terms of everything being broken down to being bullish or bearish. Sure, I disagree with Barry's severe bearishness. But I also respect the fact that we are very late in the business cycle, that obviously housing is now experiencing the train wreck that could have been expected and that unforseen ripple effects can come from that. But at the same time, corporate profits have been strong (yes past performance is no indication of the future) and wages relatively restrained, and as a result corporate leverage is nothing like it was in 2000/2001. So is terms of data, the real question is whether the unwinding of consumer leverage will hurt USA Inc. And so far, the damage does seem limited. For that reason I'm relatively optimistic, but does that make me a bull?
Posted by: tmcgee | Mar 30, 2007 5:34:29 PM
Don't worry Barry. The same people who invented "Restless Leg Syndrome" are coming out with a pill to help relieve "Confirmation Bias" soon.
Posted by: Bob A | Mar 30, 2007 5:36:47 PM
Nova Law,
If you have a thestreet.com account, you can go back in time and read some of Barry's other great calls.
Posted by: Steve | Mar 30, 2007 5:41:16 PM
