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Seen this movie before?
If Druck says it, then who are we peasants to argue?
Hang on. The demise of the dollar has been predicted for decades...
And it seems to crop up more frequently since the latest Fed policy kicked in...
We'll come back to Druckenmiller and why this happens in a second.
First off, let's put to bed this idea that the dollar is backed by nothing but blind faith and fresh air...
The dollar is backed by:
- Future productivity of the U.S. economy
- Global Trade
- Petrodollar / Eurodollar Credit System
- Military Power
All of these factors feed into a constant demand for dollars via trade & credit and this loop feeds back into the confidence and faith of the USD as the gold standard of currencies.
But the Fed are printing BILLIONS every month, they're RECKLESS & OUT OF CONTROL!
Are they really?
It's all relative, innit 👇
OK, back to Druck (one of the greatest investors of all time™), starting with his comments to CNBC in 2013 👇
How can Americans complain that cricket goes on for a long time when these Baseball innings last years?!
Fast forward to 2015...
One more... June 2020 👇
What's the lesson here?
We've established two facts about old Stanley.
- He is an astoundingly talented MONEY MANAGER
- His ability to predict the future is absolute dogshite (just like the rest of us)
So.... Should we pay attention to his musings on CNBC?
Given the evidence, I'd rather talk to him about his investing than forecasting the future.
Why do CNBC get him on instead of some no-mark then?
Why not find some (pre-2008) Michael Burry geek who's crunched the data and found something others have missed?
Because he's credible... He's a figure of authority in the investing world.
That's how the media works.
Most presenters/journalists are conversation water-carriers.
They don't usually offer strong opinions.
They leave that to the credible authority figure (guest).
It's all rhetorical...
It's also the nature of the beast.
If I wanted to try and forecast the future, I'd game out various different scenarios, assign probabilities to each and update my models as new information became available.
Imagine my CNBC interview:
Hi Joumanna, great to be here with you...
Yes I have 15 different models, each with varying probabilities.
Should I outline each scenario and then run through the maths with you?
I'm sure the viewers would be RIVETED 🙄
Journalism deals in stories of novelty and change, delivered with authority.
And because of the nature of the business, it often deals with incomplete information and selectivity bias.
Journalists need to find stories and they 'll search for the data that supports the narrative.
But they can be very useful sometimes...
The premise behind the indicator is that when a journalist or editor finally devotes a cover to a market trend, company, country or person, the story or theme has been in vogue for some time and is likely past its peak. Positioning and sentiment should already fully reflect the story on the cover of the publication and the story should be fully priced in.
In other words, by the time a journalist writes about the trend, a majority of the move has already happened.
Interestingly, their analysis finds that after 180 days only about 53.3% of Economist covers are contrarian; little better than tossing a coin.
After 360 days, the signal is a lot more reliable—68.2% are contrarian.
Buying the asset if the cover is very bearish results in an 18% return over the following year; shorting the asset when the cover is bullish generates a return of 7.5%.
The latest example?
Maybe some Brazilian diamonds are hiding in the rough...