Tuesday, March 23, 2010

Drinking the Kool Aid

 I've become obsessed lately with a dozen or so websites that I would characterize as "alternative blogs".  My view of the world has radically changed as a result of my exposure to these sites, and I'd be the first to admit, I may be drinking some really bad Kool Aid.  But I'm not so sure. I think we may be approaching the end of the world as we know it, financially speaking, but I'm still lucid enough to realize that I may just be crazy.  You be the judge.  I was talking with a friend today about my expectations for the future and the websites I'd been reading that were largely responsible for my "whole new outlook on life."  I offered to send him an e-mail with a few links to see what he thought.  I'd like to share the e-mail with you and see what you think.  Feel free to post comments.  Here's the e-mail:

Dear XXXX: 

I promised you some links to a few of the websites I've been reading lately.  Here are three of about a dozen that I read every day.  I've practically abandoned conventional business news sources like Yahoo Finance, CNBC etc.  I'm afraid they may have become nothing more than cheerleaders for an optimistic point of view that has little basis in reality.  These sites below are fairly technical and obviously written by people very experienced in finance, trading, economics etc.  I'm often confused by the terminology and the complexity of the arguments, but as I continue my reading, I understand a little more every day.  Still, maybe half of what I read is beyond my full comprehension. 

The general consensus of these sites, however, comes through loud and clear. To wit:  We are in deep Doo Doo, and the government and the major market movers are colluding to cover it up in hopes that positive investor sentiment will lead to some sort of recovery.  Bank balance sheets are a fraud sanctioned by the government to keep the banks from formally going bankrupt. Unprecedented stimulatory intervention by the government and the fed have barely kept the economy treading water, and those extraordinary fiscal measures are about to run out.  Housing statistics, mortgage default rates, unemployment numbers are all being massaged by the government agencies collecting the data to hide the severity of the crisis.  One major catalyst and the whole house of cards will come tumbling down, and in a much more calamitous fashion than in 2008-2009.  The fed is loaning huge sums of money to the banks using overvalued crap assets as collateral, essentially bringing the bank's private crap onto the public balance sheet.  The more benign points of view hold that neglect and lack of foresight on the parts of investors and government regulators led to the crisis.  The more sinister explanations blame predatory banking institutions, Goldman Sachs seems to be singled out more than most, corrupt politicians bought off with campaign donations, and a Federal Reserve that is either incompetent or actively participating in the deception. 

The consensus view here seems to promote what sound like conspiracy theories, so I am skeptical and reluctant to accept the arguments on face value.  But the arguments seem to have merit.  My own view for the present is wait and see.  I don't thoroughly embrace their story line, but I have come to see the conventional explanations as extremely suspect.  I now analyze every piece of news through the spectrum of the conspiracy theorist to see if their paradigm explains the news better than the Mainstream Media/Government paradigm.  More and more, I find the conspiracy paradigm does a better job of explaining the facts.  And to lend some credence to the doomsayer's point of view, I would refer you to this article, Basically, It's Over,  written by Charlie Munger, Warren Buffet's lesser known but equally astute business partner at Berkshire Hathaway.  I find this dire prediction from a very sensible and down to earth observer as chilling evidence that this time it really is different.

The first site below is a link to a specific article at The Automatic Earth.  I like the site because every article includes an old B/W photo in the header.  For what it's worth, this gives the site a very charming feel.  Also, they post only once every other day or so, so I can easily keep up with them.  This particular article provides a relatively clear summary of their point of view. I say relatively clear, because as I re-read it, I realize that it has a lot of jargon.  A month ago, I may not have found it so clear.  Today, it makes perfect sense to me. 

The second site, Jesse's Crossroads Cafe was the first "alternative" site that I discovered while researching a blogpost on the administration's possible plans for usurping our 401K's.  It too has a very charming feel to it.  The author also posts relatively infrequently.  More importantly, most of the dozen or so sites I read now I found through his links section.

The last site on the list, Zero Hedge,  is the heavy hitter.  The big gun of all the sites I follow.  Not as attractive an interface, but Man O Man is this site packed with the goods.  First of all, this site posts about 15 - 20 articles a day.  Presumably all by the same author.  I can barely read that much in one day, and this guy is writing it all.  Many of the articles are not just comments, but true  revelations.  Investigative financial journalism like nothing available in the mainstream.  The author uses a pseudonym, Tyler Durden.  Tyler Durden is a character in the movie Fight Club.  I'm not sure of the significance.  This site has the most to offer in terms of content, but it is also the most difficult to understand.  Some of the articles are still totally beyond me.  The other feature of this website that sets it apart from the rest is that it posts a lot of comments to the articles.  Its not unusual for many of the articles to have 50-100 comments.  This is a mixed blessing.  I can often learn a lot from the comments if the article itself confused me.  On the other hand, some the commenters seem a little juvenile in their content and their tone.  It detracts a bit from the credibility of the site, but not much as the author can hardly be held responsible for the frivolous nature of the comments.


The first few paragraphs of this article are a little confusing if you don't know the personalities on this site.  But the narrative makes more sense if you start a few paragraphs down at "Dear J"



Well, this turned out to be quite a bit longer than I intended.  Hope you find it useful.  Take some time with these sites if you find them of any interest.  I'd be curious to get your opinion.  Like I said, I'm not sure that I'm not just a 2010 version of the 1960's kook who was building a bomb shelter in his back yard.  But like they say, "Just because you know you're paranoid doesn't mean they aren't really out to get you."