Thursday, December 2, 2010

And so, at long last, Daily Kos "economic analysis" goes completely insane

- by New Deal democrat

If you are not interested in left wing political blogs, or don't know anything about the blog Bonddad and I come from, or have no interest in Confirmation Bias, just pass on. This post shouldn't concern you. I promise that boring data analysis will resume shortly.
Watching an old friend or family member sink into alcoholism, psychosis. or some other self-destruction is sad, but at some point you half to accept that they are lost to insanity. Yesterday Daily Kos reached that point. The issue goes way past the issue of a blog post being right or wrong, but rather of economic blogging that isn't a laughingstock. Sadly, it is clear that the largest number of participants there have completely abandoned the ability or desire to think critically when it comes to the economy, and are so invested in bad news that any story, no matter how nonsensical, that fits into that narrative, will be showered with accolades.

At 2:17 am Pacific time yesterday, a writer posted an entry including the following lede:
... (you probably will start noticing it in the MSM soon, if not this morning), it appears that over the past 18 hours our country's largest bank, Bank of America, may have entered into the final stage(s) of a fairly swift implosion. Obviously, the economic, political and social implications of an event of this nature and magnitude occurring right now--if it does continue along its apparent trajectory even for a few more days--are nothing less than horrific.
Yesterday, MSM and blog stories started surfacing concerning two separate issues ... with either one providing more than sufficient cause to drive the two-trillion-dollar behemoth into receivership, or worse--that place where almost all divine oligarchic institutions have gone of late: taxpayer exponential bailout hell.
(my emphasis)

This is a major, breaking story of first magnitude if true. One of the country's largest banks is possibly going to be bankrupt within days, due - according to the writer - to a NJ lower court decision about foreclosures, or publication next year by Wikileaks of some internal emails.

The story swiftly became the top-ranked post on that site, and stayed there for hours. Hundreds of people recommended it and over 500 commented about it.

Not one of those hundreds of people questioned its premise.

Not for a full 9 hours and 11 minutes until a poster named Papicek who has occasionally commented here as well, put up the following:
DJIA is up 249.76 points today and I've yet to hear anything on this from CNBC. If BoA's in trouble and it hits the MSM, it'll hit the markets hard, unless BoA has one of those special lending facilities sweetheart lines of credit available from Treasury, the Fed and/or the FDIC.
So far, all I'm hearing is market rally cheerleading on CNBC.

BTW, Bob Pisani reports that the market buzz is that all the Bush tax cuts will be extended. So, it looks like the US Chamber of Commerce Brotherhood of Thieves and Pickpockets think they're going to get what they paid for from the GOP and corpradems.

BAC shares went up 0.34 today as well, as did all 30 Dow companies.
Another two hours passed, and then a poster named Escamillo said:
You guys should take advantage by shorting BoA stock. It's not just rich fat cats that are "investors", normal people are as well, and you can be too. And if you guys are so sure that BoA is going to tank, you'd be a bunch of saps not to take advantage.

To me, this diary smells like wishful thinking in the guise of objective analysis, but for those of you taking this diary as objective truth, you can make a huge killing.
I know that there are many people who read both that blog and this one. If you do, riddle me this:

If Bank of America is potentially within days of going bankrupt, and its stock going to zero, why are the following statements all true?

- that possibility was never mentioned on CNBC.

- it was never mentioned on Bloomberg

- it was never mentioned on CNN Money

- it was never mentioned on the Calculated Risk blog

- it was never mentioned on The Big Picture blog

- it was never mentioned at Seeking Alpha (investment site)

- it was never mentioned on Mish's blog (and Mish has been a Doomer for ages)

- it was never mentioned at The Automatic Earth (uber Doomers)

- it was never mentioned at Zero Hedge (specializing in short selling stories)

- it was never mentioned at Financial Armageddon (another Doomer site)

- not one short seller like Bill Fleckenstein wrote an article nor appeared on any financial channel to try to panic investors so that they could cash in their short positions for a hefty profit.

In short, why was the first - and only - person who broke this First Order Magnitude Story somebody who has no particular investing acumen, who has no financial position, who is not an economist or advisor, but rather an obscure public relations flak who apparently has a small credit-checking business on the side?

Because the story is ludicrous, that's why. The story was based on a major factual error by the writer. He relied upon this Business Insider story that said that BofA shares were down 1.7% on Tuesday, and misread it as 17%. With that mistake, he assumed BofA was beginning a death spiral. Even though ultimately his factual error was pointed out to him, all he did was delete the reference, but he did not change his story at all - even though its premise was completely undercut.

And so invested in any story of Doom were his hundreds of readers that it never dawned on them that the story might be wrong. They made it the number 1 story for hours on end at a supposedly "reality-based" site.

This isn't about whether the economy is "good" or not. It is close to the worst level in 70 years. This also isn't about whether the economy is "improving" or not, and for what percentages of people, although I think the evidence is that it is improving for most people who are employed. Further, I claim no special knowledge of BofA. Who knows what unknown events might lurk in the future.

No, this is about basic rationality. BofA isn't going bankrupt because of Wikileaks, nor because of some lower state court decision about foreclosure improprieties. And it is absolutely not going bankrupt in the next week.

It isn't the first time that writer has been wrong. It isn't even the 20th or 50th. In fact, it isn't even the first time his prediction of Doom due to a corporation going bankrupt has been wrong. Over a year in May 2009 he claimed that there were going to be
upcoming six-figure job losses certain to occur throughout the auto industry
due to the presumed liquidation and disappearance of both General Motors and Chrysler.

The long, long record of blown predictions by that writer isn't even the point any more. Rather, the slightest amount of critical analysis would have led one to the questions finally posed by Papicek a full 9 hours after the story was published. But no such critical analysis was to be found, and those who could provide it no longer will do so at that site.

At at some time you go beyond simply being wrong to being looney. Not just the writer, but all those who were so psychologically invested in bad news that they uncritically accepted and endorsed yesterday's lunacy, have reached that point.