naked capitalism: Guest Post: “If You Can’t Tell Who The Sucker Is….”
by Tom on December 23, 2008
in Market Musings
I was quite taken with this post of our occasional guest blogger Cassandra (who holds forth at Cassandra Does Tokyo). I hope you enjoy it as well.
From Cassandra:
Thumbing through the sell-side research from their multitudes of Strategists, I notice some recurring phrases, small and innocuous as they may be, that trouble me. Time and again, they repeat, in various contexts, the mantras: “when things return to normal”, “when markets return to normal”, and “when x, y or z normalizes” with “normal” implied to be that which has been common over the past decade-or-so in respect of liquidity, leverage, asset prices, equity risk premiums, speculative activity, growth.
Mulling this over, I wonder to myself: “is this not just the perfect “recency bias” example, defined by wikipedia as “a cognitive bias that results from disproportionate salience of recent stimuli or observations”?
For as I consider what precisely is meant by “normal”, it seems to me that there is a reasonable good chance insofar as this IS “The Big One” (as Bridgewater Associates precsiently termed it nearly a year ago) that all these things – debt, leverage, consumption vs. income, relative asset prices – are ALREADY returning to normal, and the strategists, demonstrating the old poker joke about “if you look around the table and you don’t know who the sucker is, its you….”, simply haven’t yet fathomed the appropriate interval frame of the normality to which things are returning towards……
naked capitalism: Guest Post: “If You Can’t Tell Who The Sucker Is….”.
Tom here – what’s the point with all of what Cassandra has to say? I’ll say it very simply:
Normal has changed. Normal most likely won’t be the same again. Get used to it. Stop looking at the last 5 to 10 years as the way things should be…..
Hmmm, food for thought, don’t you think?
Or does “It’s different this time ring a bit hollow?”
