I do not envy the job of the economen (economist with the same track record as weathermen), but they still put themselves out there so we should learn something from them. I do have some respect or empathy for them, they are proven wrong and wrong again but they still keep coming back. Being around athletes my whole life, I have witness the guy who consistently misses the 21 ft jump shot but keeps taking it. Now if he does it in practice no big deal, it is his problem he is losing out on a chance to get better. If he does it in a game it is the team’s problem and hurts everyone.
There are two types of economen. The broken record, they repeat the same thing coming to the same conclusion despite different information. To rise to fame you just have to be right once. This is smart and they gain a following and their loyalty is forged by the human need for confirmation bias. Everything has a cycle and if you do not have to be accurate it makes sense. As they say, a broken clock is right twice a day.
The second type is the skipping record, they repeat the information coming to a different conclusion. To rise to fame they just have to be right a little, frequently enough. They gain a following by being in front of people with short attention spans.
Now, to each is own. They play a pivotal role and there is information to be gleaned. Once their thesis is supported it can move the market. A self fulfilling prophecy, just like any analysis.
There are two parts to a prediction. The reason and the reaction. If you have read my blog you know that I could care less about the reason. I only care about the reaction. Yes, over time you can get better at understanding the reason and it may help you but as far as making money it should handled with the same attention as a passive investment. The benefit of the reason is it may help to eliminate the noise and allow you to be comfortable (if you need that sorta of thing), so it cannot be completely discounted for those two reasons.
The motivation from this post came from the CNBC article on Roubini. As a trader I am always looking for a the “Perfect Storm”. Or a time where I can put on a max position. A chance to make the day, the week, the month, the year, the career. Now the issue is that in order to put on a max position you have to have bullets when the fish show up in the barrel. If you do not have bullets it does not matter much if they are in the barrel. This is why it is important to be careful of the economen, if you are going to trade it, realize that the reason does not always mean appropriate reaction. This has been especially true over the past 2 years. The biggest thing that QE and intervention has done is it has dislocated the economy from the market or more cynically reality from the market.
There will be a time when the economen are right but right now the macro people are missing the big picture. I am not a macro analysis, yes I do look at the big picture view of the market (you can sign up for FREE below) but executing it on a short time frame reveals the microcosm. Mainly no one is getting aggressive yet. This along with recent history tells me that the Perfect Storm is not near land. At the same time, this is about survival and it is nearly impossible to stop a boulder once it starts rolling down the mountain.
If you can’t repeat, learn from, or improve from analysis it is just info porn or feeding the ego of a tv personality.
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