Over the last 16 years, it has become routine for “experts” and pundits to miss MAJOR issues by ignoring data points that don’t confirm their own views, only to later proclaim, “no one saw this coming” when a crisis erupts.
Whether we are talking about the Tech Bubble, Housing Bubble, EU Crisis of 2011-2012, US Dollar bull market/ Oil Crash of 2014, China’s hard landing or the BREXIT, there have been repeated instances in which the “experts” completely missed glaring issues.
You could easily fill a book with the various explanations for why this is. However, I believe they all ultimately boil down to two key items:
1) The inability to perceive one’s own bias/ tendency towards groupthink.
2) Career risk.
Regarding #1, everyone has a natural bias. The problem with many in the “expert/ media” class today is that they usually only associate with those in that same class.
In this context it is very difficult for these individuals to avoid groupthink as the vast majority of them (media-types/ talking heads) only associate with others who live in the same metro centers, live in the same social class, and run in the same social circles.
There is nothing wrong with associating with others who have the same views. However, when one’s job is to present his or her views as factual analysis to the rest of the public, confirmation bias can be a real problem.
This is particularly true in the highest echelons of the political/financial elite, such as Central Banks. The fact is that individuals like Janet Yellen only associate with high-level public policy makers and Wall Street banks. Indeed, even amongst DC’s wealthiest, most connected individuals, Janet Yellen is isolated by her prominence in the economy.
In the Georgetown gated community of Hillandale, residents live in secluded calm governed by some 50 pages of rules banning fences, motorcycles, certain paint colors, tree species and excess dogs and cats (no more than two total per household)…
Then one of the most powerful economic policy makers in the world moved in and, in the words of some here, ruined the neighborhood.
As neighbors tell it, earlier this year, the security detail protecting new Federal Reserve Chairwoman Janet Yellen barreled through the cul-de-sac where she lives in oversize vans loaded with guns, cameras and takeout pizza. It established an "armed camp" next door to Ms. Forman's townhome, according to a written bill of grievances presented by concerned neighbors deeming the uniformed police presence "uncomfortable for residents of various religious persuasions," such as Quakers…
"The government is paying $5,000 or $6,000 a month or more to rent a whole townhouse in Georgetown to put cops in," says international attorney William Shawn, who lives down the street from the newcomers. Is this really necessary, he wonders, to protect an unarmed economist from Brooklyn?
http://www.wsj.com/articles/yellen-s-security-detail-irks-neighbors-1404095412
In this light, the notion that Yellen might be even remotely connected with “life on Main Street” is absurd. Small wonder then that she cannot understand criticisms of Fed policy.
After all, everyone the Fed Chair associates with is in the wealthiest 0.1% and has seen his or her wealth increase exponentially thanks to the bull market in stocks and real estate. So Yellen is undoubtedly surrounded by individuals who reflect her own bias of believing she is right in her policy choices.
This is why the Fed never sees bubbles coming. It is also why the Fed’s forecasts are so inaccurate. No matter how intelligent a Fed official might be, he or she is still human and has the human weakness of confirmation bias.
Throw in the fact that polls and surveys are no longer accurate and you quickly realize just why there is such a HUGE gap between the policy makers’ forecasts and economic realities.
On that note, we firmly believe the markets are preparing to enter another Crisis. With over 30% of global bonds posting negative yields, the financial system is a powder keg ready to blow. And as usual, the Central Banks are clueless about the risks.
We are already preparing our clients for this with a 21-page investment report titled the Stock Market Crash Survival Guide.
In it, we outline the coming crash will unfold…which investments will perform best… and how to take out “crash” insurance trades that will pay out huge returns during a market collapse.
We are giving away just 1,000 copies of this report for FREE to the public.
To pick up yours, swing by:
https://www.phoenixcapitalmarketing.com/stockmarketcrash.html
Best Regards
Graham Summers
Chief Market Strategist
Phoenix Capital Research
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