The media/pundit narrative is almost always wrong, and why

A good heuristic is, the media/pundit narrative is almost always wrong.

They said:

–Trump cannot win

–Trump will doom stock market & economy

–Trump cutting off trade deals will hurt economy

–Trump will hurt foreign relations

–The bull market hinges on Trump passing tax cuts, and if he fails the market will crash

–The economy will fail/market will crash/debt too high/inflation/etc.

–Housing prices in Bay Area are a bubble

–Bitcoin will crash

The reality:

–He won

–He didn’t

–It didn’t (the S&P 500 boomed in the 80′s, years before NAFTA)

–He didn’t…a case can be made that foreign leaders respect Trump more than Obama, or are at least more willing to play ball with Trump. From Donald Trump Has Unleashed the Saudi Arabia We Always Wanted—and Feared:

That Trump’s first foreign trip was to Saudi Arabia was unprecedented. Indeed, it’s stunning to consider that Trump’s four immediate predecessors made their first foreign trips to either Canada or Mexico. The Middle East is usually a place where U.S. schemes and dreams for transforming this broken, angry, and dysfunctional region go to die. But the Saudis turned Trump’s first foray outside the United States into a veritable love fest and string of hyperboles: He cut “tremendous” deals and expressed his pride in the new relationship and the “like-minded” goals the two nations share. The Saudis, having mesmerized and disarmed the president and official Washington with their glowing orb, were given a series of blank checks and a margin to maneuver in the region — without giving much in return.

Thanks, in part to Trump, the Saudis are overhauling their regime by purging corruption. Such reforms are partially due to Saudi Arabia’s transition from a petrol-based economy, to one based on intellectual property and services, but that requires being more hospitable to ‘western values’. Of course, trying to ‘westernize’ Iraq failed, so it’s far too soon to know how this will turn out, and there is the possibility of destabilization (such as Iran), as was the case as a consequence of the Iraq war. [In invoking my own heuristic, I am optimistic nothing serious will happen. Erring on the side of 'not being concerned' has worked well.]

–It doesn’t. Despite all the dithering, tax cuts are happening either this year or next. But also, the stock market surged in the second half of 2016, before Trump was in office. It also surged in 2017 after Trump’s first tax proposal failed. So it’s not like the bull market is dependent on them.

–Double digit S&P 500 earnings growth, plus low inflation, and low interest rates is a recipe for much further upside. Interest rates and 5-30yr treasury bond yields are very low, indicating low inflation and low anticipated inflation.

–Home price in high-IQ areas keep going up due to huge foreign demand, booming Silicon Valley economy, and scarcity–not bubble

–At some point Bitcoin will fall a lot, but the pundits have been saying that since it was at $100 in 2013, and now it’s at $10,000. Maybe they should just admit they have no clue what they are talking about. The problem is there is no accountability for pundits who are wrong all the time. The downside of being habitually wrong is zero, but the bragging rights for being right by chance are huge, the result being lots of bad predictions. This goes for financial pundits especially. Doom and gloomers such as Mauldin, Shiff, Faber, Zerohedge, etc., who keep predicting hyperinflation, recession, dollar collapse, bear market, crisis, etc. year after year to no avail. Because being right is rewarded and being wrong isn’t, this creates an incentive to not only make more predictions, but make more drastic ones. Predictions of crisis and crashes get more attention than predictions of a continuation of a trend, yet the latter is much more likely to be correct.

Contrary to popular belief, predicting a collapse during a bull market does not make one a contrarian; it’s the actually the opposite, because the pundit consensus is that prices will correct sharply. There are more negative headlines about Bitcoin and stocks than positive ones. During the 2003-2006 housing market boom and the 90′s tech boom, there were as many, if not more, predictions that prices would fall than predictions prices would keep rising.

In the case of Trump and why foreign leaders like him, the media and other left-wing pundits let their biases get in the way. They fail to understand that the rest of the world is not like them. What I mean is, a Harvard professor who thinks Trump is an incompetent moron cannot rationalize a worldview outside of his own, but also because he’s used to being right about academic stuff and being lauded for being right, he is deluded into believing that he will be right about Trump too. This is related to the false-consensus effect, “…an attributional type of cognitive bias whereby people tend to overestimate the extent to which their opinions, beliefs, preferences, values, and habits are normal and typical of those of others (i.e., that others also think the same way that they do) …”

The rest of the world is not run like Harvard and the New Yorker are, which are staffed by academics with IQs of over 130, but rather by mid-witted leaders and bureaucrats who have IQs of only around 100-115 or so, which is closer to Trump’s IQ. The vast majority of countries, such as Saudi Arabia, Turkey, Brazil, Germany, Philippines, etc., don’t have an ivory tower ‘intellectual elite’ culture in the same way America does. Although Germany has a lot of smart people and academics, they are not elevated to the ‘priestly’ status as the are in America.