In the last few weeks, big-names have begun screeching about the evils of the Federal Reserve like never before.Today, Bill Gross, who is frequently accused of talking his book and being too in bed with the government actually busts out the word “ponzi,” a favourite word of Fed critics.
Yesterday Jeremy Grantham depicted Ben Bernanke as a bubble-inflating, economy-destroying zombie.
Last week, the famed currency trader John Taylor compared Bernanke to Adolph Hitler.
John Hussman has been calling the economy a Ponzi in some manner or another for some time.
There are surely the countless more examples of over-the-top rhetoric among big investors than what we came up with in 45 seconds worth of searching.
So what’s going on? Does all this caterwauling actually signal impeding doom?
You’d be forgiven for being terrified, but no, the end of the word won’t be preceded by a bunch of multi-millionaires whining about the end of the world.
Remember this: All these investor letters are MARKETING.
Bill Gross doesn’t have to write a long monthly letter that he posts on his website. He does it because it’s great marketing. Everytime one is published it’s huge news. Hussman doesn’t need to write a weekly letter, but it does keep him in the media week-after-week-after-week-after-week. And because these guys are good writers with insight, it doesn’t really matter if they’re wrong (see also: David Rosenberg who publishes a very entertaining daily note).
Now, because there’s only one CNBC and only one Bloomberg, and since even blogs can only cover so much stuff, the knock-on media attention is still scarce. You can’t just use the same lines over and over again, and expect to get quoted up the wazoo.
It’s not enough to say stocks are overvalued. You have to talk about speculative bubbles, and the mania for risk assets, and explain how it’s all Ben Bernanke’s fault. And when that’s not enough you have to explain how Ben Bernanke learned economics from Bernie Madoff. And when that’s not enough, you just drop the Hitler comparison.
So you can see that regardless of the economic reality, the mere competition among managers forces them to raise their rhetoric.
Don’t believe that it’s marketing and nothing more?
Just consider how these guys actually invest.
If Bill Gross ACTUALLY thought the economy was a Ponzi Scheme, he’d dump every US bond he has, and join Marc Faber in Chang Mai. No, instead he’s probably just tweaking the duration of his holdings.
Or take Jeremy “Night of the living Fed” Grantham. Did you see what he’s actually invested in? At the end of his note, he mentions high-quality US companies, which is only the MOST RECOMMENDED INVESTMENT KNOWN TO MAN RIGHT NOW. Seriously, if we actually thought that the Fed was run by zombies, we would not be buying US stocks right now. We, too, would be booking it to Chang Mai, Thailand.
So don’t be scared. This is about media attention. Yes there are risks, and one day the end of the world will in fact come, but it won’t be for the reason that everyone is yelling about, right when they’re yelling.
Oh… and one more thing. We in the media LOVE these letters. Keep ’em coming!