Economic Experts versus Ish Kabibble

Ish Kabibble wasn’t really Ish Kabbible as anyone old enough to remember the big bands and especially Kay Kyser and his Kollege of Musical Knowledge would know. Ish who played the cornet and appeared in ten motion pictures with Kyser and his clan was born Merwyn Bogue of North End, Pennsylvania. Ish wore his hair in a Moe ‘Stooge’ Howard style and played the role of a simpleton. In reality Ish or Merwyn was an accomplished musician, studied law at West Virginia University and was the business manager for Kyser from 1931 to 1951; and finally, when the days of the big bands died away, he had a successful career in real estate. The whole idea of a smart person playing the part of an idiot is easy enough for us to accept. Believing an idiot is a genius is something that strains our credulity. Unfortunately there are more people in the financial information business today who are more like Ish Kabibble than even Ish Kabibble was like Ish Kabibble.

If it doesn’t confuse the public then it doesn’t make it to print or video. Take the recent quantitative easing that the Federal Reserve is doing. The Ben Bernanke is simply buying cheap treasuries to lower interest rates and the dollar. I got so many questions, rightly so, on what the heck does quantitative easing mean I could have sold my answers for a nickel and retired. That was just one instance in how silly people in my business are. And a lot of time folks in Wall Street just make stuff up and neglect to tell anyone else. Then, out of the blue everyone on CNBC is using a new word or phrase like we’re all supposed to know what their talking about. It seems like high school all over again.

If it doesn’t confuse it doesn’t make it to the public.

I am also finding that most of the financial experts only think they know what they’re talking and writing about; and if whatever they say, or scribble, fits a comfort level with the people they reach they get a standing ovation as being brilliant. It isn’t until after the disaster happens that their audience reruns why they did what they did and who was the root cause of it all.

Historically there is no reason why the values of homes should not continue to increase. –any Wall Street or Investment Bank prior to 2oo8

At one time Alan Greenspan, who headed the Federal Reserve, was lauded as a brilliant political economist in part because few people understood what the hell he was talking about. Everyone loved Alan and Alan loved Alan and the whispers were how well Alan handled himself politically out and about the Washington DC cocktail circuit. Greenspan himself cultivated the image as a brainy eccentric peering down at the rest of us mere mortals as but worker drones and dunces. He once said, ‘I guess I should warn you, if I turn out to be particularly clear, you’ve probably misunderstood what I’ve said.’ But Mr. Greenspan was one of the culprits in the eventual economic 2008 crisis as he left interest rates at exceedingly low rates for an extraordinary period of time. In his memoirs Greenspan reflects on his mistake as something he did not consider during his reign as Fed chief. You would think that someone who was so prescient to warn about the dot com craze as ‘irrational exuberance’ would have seen the bus of disaster coming around the bend with the low rates forever mantra. He didn’t. In fact just the opposite Greenspan commented that, ‘The housing boom will inevitably simmer down.’

Greenspan was right about the housing boom but not in the way he imagined.

Very few, if any, political economists were right about the economic crash. Those that were, if you read the books, were ahead of the curve and outside the culture of Wall Street and started placing massive bets a year or more ahead of the disaster. It was like someone today building an ark in their backyard just before the spring rain. It was that kind of bet that had every economist laughing and pointing fingers until the first raindrop dropped which was a hedge fund run by Bear Sterns.  Bear is no longer and Lehman Brothers was next and the race for the stock bottom was on as everyone had to get liquid quick.

Political economic soothsayers come cheaply to the party but if allowed can leave with everyone’s goodies. The only way to protect yourself is to indeed listen to everyone’s opinion but make sure that your own opinion is at least as important and in the end has the loudest voice.

When making a decision make sure you listen to everyone but always give your voice the most importance.

In one of my favorite movies, ‘Let It Ride’, Richard Dreyfus played a horse player who never had a winning session until one day he just couldn’t lose. In a particularly memorable scene he picked the winner of one race by asking every horse racing expert at the track what horse they liked in that race and then scratching that horse’s name from his racing form. The one horse no one liked was the one he bet on and, of course, the one that won.  Everyone he had asked became angry when he won and demanded why he didn’t share the name of the winner with them. He said he didn’t because he got the name from all of them. All the so-called horse racing experts were wrong and Dreyfus knew enough to just ask and then act on it.

Don’t be swayed by someone who you think knows more than you. The fact is that most people can make intelligent successful investment choices if they spend the time to read, listen and learn. But the most important ingredient that the average investor has is common sense. You’ll never run into a political economist who has that.

Questions call Paul @ 877 783 7080 or write him at pstanley@westminsterfinancial.com. Share this blog with someone who cares about their money.