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CS Evaluation of Rogers/Snyder Crash Prediction, cont’d

CS Evaluation of Rogers/Snyder Crash Prediction, cont’d

We are making fun of Snyder, though, who seems to delight in Chicken Little like cries that the sky is falling and the world is about to come to an end.

Timing is everything, in the investment arena especially. As we have pointed out previously, everyone who bought gold in 2011-2012 as a result of prophetic urging or alarming cries is now down between 40-60%. Eventually they will be right, of course. But they may have to wait another twenty years – and what good does that do them in the meantime?

Several comments here:

  1. Jim Rogers has been right before and wrong before. More than one person predicted the 2008 GFC – and many of those who did were predicting it way before it happened. Wrong timing. And they – and those who believed them – lost money waiting.
  2. An inverted yield curve does not predict financial or economic crises. It may predict recessions, but it has not been 100%. And when it does predict recessions, it predicts them within a window of about 2 years. So, if the yield curve does invert this year – not a certainty – then we may have a recession sometime before 2019-20.
  3. There is no economic or monetary indicator that is by itself a foolproof predictor of recession or especially of an economic crash. The GFC of 2008 is still considered a black swan by many – most people did not see it coming.
  4. The markets have recovered past the levels they were at as a result of the 2008 GFC – those who did not panic and did nothing are better off than they were before the crash.
  5. What Snyder repeatedly engages in has a term in the investment arena – confirmation bias. You start with a presupposition or bias – like, the world is going to end soon. Then, every piece of information that comes along is interpreted within and by your framework. It is almost impossible to draw any other conclusion, to the extent that you become more and more convinced of your original proposition and its ‘correctness.’
  6. Challenges to statements Snyder makes:
    1. “So the fact that he [Jim Rogers] is warning that we are about to see the worst stock market crash in any of our lifetimes is making a lot of waves in the financial community.” Really?!! I’ve not heard one conversation about it on the major business channels. That’s all right though, I could have easily missed it. But, it must not be making major waves or it would be on every channel all the time. Rogers is just not that influential anymore. Most ‘experts’ in the investment arena think for themselves…
    2. “Could it be possible that all of these incredibly sharp minds [Jim Rogers, et al] could be wrong? Yes, but I wouldn’t bet on it.” Just like in the world of academics you can find “experts” on both sides of any argument. That one group believes something doesn’t make it true. In this instance, there are also plenty of good arguments that the markets – in spite of being somewhat overvalued – will continue up a “wall of worry.”
    3. “So that means Rogers is convinced that the coming crisis is going to be even worse than what we went through in 2008. Of course, this is something that I have been warning about for quite a while….” Confirmation bias. So, the implication here is that both he and Rogers are predicting another GFC in the next year or so. If this is the case, our economy would probably not survive and the US would be relegated to third world status. The next statement he makes is the only really accurate one…
    4. “An unprecedented financial crisis is most definitely heading our way, and the only thing left to be answered is how soon it will get here.” Yes, in all probability an unprecedented financial crisis is headed our way. But many more indicators need to be lined up before it is imminent. CS estimates that the next financial crisis probably won’t occur before 2025-26 or so; and whether this will be the really big one is anyone’s guess, but probably not. It will probably lead into the really big one, which is about 20 years into the future. Will we have a recession or recessions before then? Definitely. This is part of the normal cycle. Will we have stock market corrections before then (10% or 20% or more)? Yes. This is also part of the normal cycle.
  7.  As the body of Christ we need to look at predictions comprehensively, holistically, and with wisdom. We should be leading in this category, not following. CS’s advice to be globally diversified and balanced holds.

Also see Stockman’s prediction here, similar to Snyder/Rogers. But, note, a 30% correction is a severe correction, but still not a crash in keeping with the 2008 GFC. The article offers some viable strategies for those concerned with a correction.