FACTS DON’T MATTER
Or so this important Boston Globe piece concludes. Talk about your root problems! How can democracy succeed if, confronted by facts that prove them wrong, voters just become more intransigent?
“The general idea is that it’s absolutely threatening to admit you’re wrong,” says political scientist Brendan Nyhan, the lead researcher on the Michigan study. The phenomenon — known as “backfire” — is “a natural defense mechanism to avoid that cognitive dissonance.”
. . . it appears that misinformed people often have some of the strongest political opinions . . .
. . . if you feel good about yourself, you’ll listen — and if you feel insecure or threatened, you won’t. This would also explain why demagogues benefit from keeping people agitated. The more threatened people feel, the less likely they are to listen to dissenting opinions, and the more easily controlled they are.
☞ Go get ‘em, Sarah!
Not that I may be entirely immune myself:
. . . politically sophisticated thinkers were even less open to new information than less sophisticated types. These people may be factually right about 90 percent of things, but their confidence makes it nearly impossible to correct the 10 percent on which they’re totally wrong.
Steven Schatz: “With regard to your posts on Robert Prechter, I have followed him for many years, having been a subscriber to his newsletter since 1983, and subsequently studying with his personal trading guru (via his referral). I retain the deepest respect for his brilliance, insights and compassion. Bob didn’t get the kind of reputation that would enable an interview in the New York Times by being a kook. Far from it. Although he’s outside the mainstream of conventional market analysts, his work retains a following in even the most conventional of Wall Street enclaves. He called the Bull Market of the Eighties perfectly. Then 1987 dawned. I remember vividly his declaration in early September, 1987 that Wave 3 (huge upwave) was complete and we were heading directly into Wave 4 (a short sharp down wave or a shallow, prolonged sideways movement). Here I’m paraphrasing terribly but the gist of his advice at this point (September, 1987) was, ‘The stock market’s powerful rise is over for now. Those who are long term investors will want to hold on to all investments since Wave 5 is still ahead and will likely result in further upside; those who are intermediate term investors will want to get into cash and on the sidelines; those who are short term speculators can consider short positions.’ So far so good. Then things got Interesting…
“By Friday, October 16, 1987, the Dow had suffered a serious move to the downside. That afternoon his short term trading service suggested purchasing calls. Yes long calls – which would benefit from a movement upwards in the markets. The next trading day was Monday, October 19, 1987, now known as Black Monday. By the end of that infamous day, the Dow was down 507.99 points or 22.6%, the largest one day move down in history on a percentage basis. The stocks comprising the Dow lost approximately 500 billion dollars that day. Even today, that’s an eye popping number. The shock of the Crash propelled Bob Prechter to make an unprecedented re-evaluation of his wave count. What was previously considered Wave 3 was now labeled as Wave 5 (the last of the series) and therefore Black Monday was an “A” wave, the beginning of the End of the Road. He expected an imminent sharp rise (a “B” Wave) and then a massive collapse (“C” Wave), not just in the markets, but in the economy and in society in general. Subsequently, he completely and totally missed the massive Bull Market of the 1990’s. Mind you, his short term service still provided a respectable return on investment through the Nineties. Despite his profoundly bearish stance, Prechter’s brilliance and clarity allowed him to retain a grip on reality and in the face of his overarching perspective, he was able to steer with the winds. Nevertheless, he fought the bull market every step of the way.
“Lots more to say about his work. Being an original thinker, he has contributed a huge amount to our understanding of the markets and economy, and continues to provide meaningful analysis and perspective. The field he is developing, ‘Socionomics,’ lends a unique approach to the link between social mood and the markets. His team of analysts is outstanding. He is not a lone wolf, nor is he anything even close to a crank. He is a deep, thoughtful, compassionate and engaging individual. And, I am inclined to say, his bearish perspective, scary as it is, may prove out in the years ahead. Although I disagree with his ‘it’s all bleak and downhill from here’ outlook and believe we will witness and benefit from some incredibly positive discoveries and events in the years ahead, these may take place along with dissolution, decay and possibly even chaos. All and all, whether the Dow truly does dip under 1,000, with both important and subtle differences Prechter’s exceedingly bearish outlook may end up being on the right track after all.”
☞ Or not. The only two points I’d make (other than thanks for that very thoughtful recap) are: (1) the future is way too complex to predict in this way; (2) we’d be wiser to take Prechter’s prediction not as what will happen, but rather as motivation to make sure – even if it requires doing unpopular but necessary things, like weatherizing our homes rather than making them bigger – it does not.
Quote of the Day
For all those whose cares have been our concern, the work goes on, the cause endures, the hope still lives, and the dream shall never die.~Ted Kennedy
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