Saturday, August 29, 2009

Spot The Contrarian, or: How To Watch TV

This is a great example of how "contrarian" and "mainstream" analysts may look like on TV. TrimTabs' Charles Biderman has built a formidable fact-tracking system and managed it for years; but his data is no match to the interview skills of his mainstream counterparts, who nonchalantly brush him off - almost as if he was some conspiracy buff with no shred of evidence. In fact, TrimTab's data seems to have given warning signals where some others did not.

In research described in Prof. Dan Arieli's "Predictably Irrational", it was found that people follow the advice of financial advisors based on their self-confidence, not on their results - in fact, sometimes contrary to their results.
Volunteers were more likely to buy advice from confident advisers (such as the 100% adviser from above) than those who spread out their percentages. What’s more, this tendency led advisors to make their advice more and more precise in subsequent rounds – but not more accurate.

These findings are troublesome. Because though confidence and accuracy sometimes go hand-in-hand, they don’t necessarily do so. And when we want confident advisors, some will exaggerate to give us what we want. Maybe this is why so many pundits on TV for example exaggerate their certainty? (our emphasis - KYI)
Watch it now:

How does one appear more self-confident? Perhaps by repeatedly addressing the interviewer using her first name, as does TheStreet's Mr. Insanata. Perhaps by framing one's predictions with clear, round numbers. Disclosure: I used to publish my columns in a print publication co-owned by TheStreet myself, though I never met Mr. Insanata or his editors.

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Pace of Insider Sales Continues to Escalate

Ockham Research on Seeking Alpha
"Thus far, the bearishness of insiders over the last four months has led to some missed gains thanks to the continued rally. However, instead of regaining their faith in this market, insiders are digging in their heels on the bearish side of trades. Readers can come to their own conclusions about the implications of such a strong and defined trend, but the CEO of TrimTabs certainly has an opinion.

“The best-informed market participants are sending a clear signal that the party on Wall Street is going to end soon…

Investors who think the U.S. economy is recovering are going to get a big shock this fall. Companies and corporate insiders are signaling that the economy is in much worse shape than conventional wisdom believes.”– Charles Biderman CEO of TrimTabs Investment Research"

Tuesday, August 25, 2009

Michael D. Intriligator and R. Kyle Martin: The Rise and Fall of Artificial Wealth

Michael D. Intriligator and R. Kyle Martin: The Rise and Fall of Artificial Wealth

Good all-around article, though it never mentions the underlying politics and sources of the trends. As a result, it sees Obama's direction as an error... not as a predictable and sustained policy.

Welcome to Wave 2

Foreclosure Woes Spreading To Good Borrowers In Unexpected States:
"Amid record levels of home foreclosures nationwide, there are worrying signs that the foreclosure crisis could be spreading to parts of the country that had previously been relatively unscathed."

Court Orders Fed to Disclose Emergency Loan Details

Court Rules Federal Reserve Must Disclose Emergency Loan Details:
"The Federal Reserve has been ordered to reveal the names of companies that received emergency loans during the financial crisis, after losing a Freedom of Information Act lawsuit brought by Bloomberg News. (Check out Bloomberg's full story here.)"
Will we get a list of companies whose cumulative problems run up to $2tn? If this list includes banks with solvency problems, this might have legal significance, as some banking situations are covered in specially enacted laws.