No, Ken Fisher, The New Normal is Not “Idiotic”— You Are

Why does Ken Fisher have any credibility left? And why does he seem so eager to make an ass of himself ?

Via Bloomberg, this takes the cake:

Fisher said the concept of a “new normal” is “idiotic,” pitting him against money managers including Mohamed El-Erian, the CEO of Pacific Investment Management Co., which coined the term to describe a world of high unemployment, more regulation, and the shrinking importance of the U.S. in the global economy.

“We are chimpanzees with no memory,” Fisher said at the Forbes Global CEO Conference in Sydney.

“The next 10 years are going to be just as good as the 1990s. The problems in this current environment we think are so different, and so new and so unique. It’s the same stupid old normal we’ve always had. We’ve got a great future.”

Chimpanzees with no memory? Seriously?

Speaking of “no memory,” how about this Ken Fisher transcript quote from Summer 2007:

“The fact is, this is just all minor volatility in a trend going nowhere, and is tiny compared to the forces that want to push things toward happier and better times right now. And this is all just fears of much ado about nothing, which, over time, will fade.”

Minor volatility… much ado about nothing… anyone who relaxed on the basis of that view was absolutely destroyed in the 18 months that followed.

Via Bloomberg again:

Fisher said in October 2008 that U.S. stocks were close to the bottom. The S&P 500 fell about 30 percent from October 2008 to a 12-year low in March 2009.

Oops.

You would think when a guy completely and utterly misses the boat on the biggest economic storm since the 1930s — and missed his bottom call by 30% (!) –  that he at least would be self-chastised a little bit into not being so hand-wavingly optimistic next time a crisis wave threatened the markets.

Here is the unrepentant permabull in April of 2010, waving off all troubles just as Europe was headed into a Greece-tipped crisis vortex:

[Fisher] blew off fears that Greece’s debt woes could spread across southern Europe, scoffing: “And then after that the aliens come?”

Greece has been unwilling to pay up to meet the demands of investors who should see the country the same as lower-quality corporate debt, he said, adding, “Greece is trivial.”

Right. Trivial. Thanks for that.

Pop quiz: Now that Ireland (one of the first countries to embrace austerity) is back in the danger zone, with 5 year CDS spreads at nosebleed highs and Anglo Irish bailout estimates surpassing 35 billion euros, can you guess what ol’ Ken’s take on the whole situation will be?

Yep — probably some new variation on “trivial.”

I mean, this — this asshole – is completely, 100% wrong in respect to two of the biggest crisis- and debt-related events in generations, and yet he still has the pure chutzpah to imply of his critics — who are speaking to matters of leverage and debt buildup — that they are “chimpanzees with no memory.”

It’s hard to fathom. Unless, of course, Fisher was referring to himself as an amnesiac chimpanzee.

I normally try not to bother too much with talking head blather. There is just too much of it out there, and 95% percent of it (if not 99% percent of it) is useless.

But Ken Fisher in particular offers up such a nauseating mix of arrogance and ignorance that it literally boggles the mind.

The man lives on his own planet — a planet where the markets are always bullish, where crisis doesn’t exist, and where asset gathering is the holy grail. (I have received, at minimum, at least half a dozen Fisher investment pamphlets in my mailbox over the past two years.)

Think that assessment is too harsh? Consider this Tech Ticker interview from September 2009, where Fisher actually argues the US needs MORE debt, not less:

The U.S. has too little debt, not too much, Fisher says.  The U.S.’s return on assets is high and interest rates are low, so our borrowing capacity is much higher than our current debt levels.

Also, Fisher says, you have to look at the U.S. in the context of the world, because the U.S. is only 25% of world GDP.  The world is way under-leveraged, so one country’s particular debt-to-GDP ratio doesn’t matter.

Again I ask you, WHO IS STILL LISTENING TO THIS GUY? AND WHY???

Let’s get back to the “new normal” concept. Fisher says the new normal is “idiotic” and that “the next 10 years is going to be as good as the 1990s.”

But why, Ken? Why?

Are you seriously telling your audiences things will be the same as they were before — just like the good old days — simply because you say so? Do you “have it on good authority?” Are you simply asserting it on your own authority (perhaps your excellent crisis-related track record)?

In other words, is there an ACTUAL RATIONAL ARGUMENT as to why we will return to the equity performance levels of the 1990s, or are you simply engaging in magical thinking?

Here is what is so infuriating about calling the new normal “idiotic:”

• The new normal thesis is based on logic.
• The new normal thesis is based on evidence of unsustainable trends.
• That which cannot go on forever, eventually must stop.
• We saw this with the housing bubble.
• We saw this with the leverage and credit binge on Wall Street.
• We saw this in the implosion of the shadow banking system.
• We saw this with household balance sheets.
• We saw this in the global financial crisis that Fisher said wouldn’t happen.
• We saw this in 800 years of economic history via Reinhart and Rogoff.
• We see it in persistent long-term unemployment.
• There is a case. There is evidence that demands a verdict.
• The only thing “idiotic” is dismissing that case out of hand.

Perhaps you more or less agree with El Erian and PIMCO’s “new normal” thesis, or perhaps you disagree.

But I submit to you that at least El Erian and PIMCO present their case based on a coherent foundation of logic, reasoning, and observable fact.

Ken Fisher, in contrast, seems to simply assert that “things will be like they were before” just because he wants them to.

On the one hand you have a well-thought-out world view based on observable patterns and trends — with a foundation of logical and mathematical support — and on the other hand you have an ad hominem assertion from a guy with a serial fondness for distorting reality.

I didn’t mean to go on a rant here. But I have an extra helping of loathing and disgust for commentators like Fisher because 1) they aren’t interested in rational objective analysis, and 2) they aren’t interested in protecting and preserving investor capital.

Look, everyone gets it wrong from time to time. Sometimes a thesis has to be modified, or even discarded completely, as facts on the ground change. (Traders know this reality intimately.)

And no macroeconomic forecast is completely accurate or even close… even a very good and very well-grounded forecast should be considered a flexible guide-rail at best.

But the whole point of making any type of forecast at all is to guide and manage investing and trading decisions on a rational basis, while staying as objective and flexible as possible along the way, and meanwhile preserving investor capital and being cognizant of risks (including fat-tail risks) to a significant and prudent degree.

But for guys like Fisher? Forget all that rational objectivity and preservation of capital stuff. Ken just wants to gather up more tens of billions in assets so he can charge fatter fees all the livelong day.

And if his obnoxious hand waving viewpoints cost you the loss of your retirement savings for having casually dismissed a potentially catastrophic risk as “trivial”? Oh well, who cares.

JS