Shortly after noon on Saturday, a Zero Hedge tweet caught my attention. It was entitled “‘From Bubble-Blower To Energy Expert, Alan Greenspan warns ‘Oil Hasn’t Bottomed Yet.’” Apparently he was on Bloomberg with Betty Liu, and in the interview talked about low U.S. productivity, the strong dollar, falling capex, rising entitlements, and, of course, oil. Hence that headline. He talks about how storage capacity at Cushing, OK, is rapidly filling up, how oil is in contango, and how we are lucky if we can get $40.
Mr. Greenspan is a former Fed chief, and obviously gets headlines, especially when he comments on something as topical as oil. Frankly, I was pleasantly surprised to find out how much he knew about oil. Time will tell if he is right or wrong.
Personally, I think oil is headed still lower. But who cares what I think? What do I know about oil anyway? Even the sell-side analysts who follow the industry for a living failed to see the collapse coming. Some of these people know the industry so well they probably know which executive went to what high school and who dated whom in college. Yet, when it came to the big move, they missed.
The attempt here is not to put these analysts down, rather to show how hard it is to get it right. They are all hard-working people and do the best they can.
Humans are human. We crave the spotlight, and yet we are fallible.
Staying within finance, some of the predictions we run into look downright outlandish when they are made. Gary Shilling, the famous economist, is talking about $10/barrel oil. He is lower than Citigroup’s Ed Morse, who has said oil could fall to the $20 range “for a while.” Goldman’s Jeff Currie does not even come close to Mr. Shilling’s forecast. The Goldman analyst recently told Tom Keene, of Bloomberg, that crude oil may fall below his six-month forecast of $39.
The issue facing investors is that these are people with excellent track record and cannot simply be brushed off. Mr. Shilling is one of the few that nailed the bull market in U.S. Treasurys. There are not too many economists/strategists around with that distinction. So should we take his oil forecast at face value or with a grain of salt?
The question arises as time and again we also run into calls that seem to have one objective in mind – create a buzz.
Pre-split, a sell-side analyst had a $777 price target on AAPL. Before that, that same analyst had an $888 target. Even before that, his target was $1,001. See the pattern here – three seven’s, three eight’s?
I mean, come on!
What was it – a DCF (discounted cash flow)-derived price target or designed merely to draw attention? If it is the latter, he succeeded. We are discussing it.
But it also begs the question, has it always been this way on the Street?
Since the whole discussion began with Mr. Greenspan’s oil comments, let us look at some of his predecessors. What was it like back in the days of Paul Volcker (August 1979-August 1987), George William Miller (March 1978-August 1979) or Arthur Burns (February 1970-March 1978)?
CNBC was only founded in 1989. Bloomberg TV was not launched until 1994, and Fox Business came into being in 2007. So obviously these gentlemen upon leaving office did not have the same platform for expression of views as did their successors. May be some speaking engagements. And that was probably it. The 24-hour live news cycle had not arrived yet.
As far as I know, none of the three wrote a memoir after leaving office. (Mr. Volcker did write a foreword in Henry Kaufman’s book On Money and Markets.)
How times have changed!
Mr. Greenspan (August 1987-Jan 2006) wrote a memoir titled The Age of Turbulence: Adventures in a New World, published September 2007. Shortly after leaving office, Mr. Bernanke (February 2006-February 2014) made it public that he was planning a memoir.
It is good to be in the limelight. It pays to have a built-in audience.
Katy Perry, with nearly 67 million followers on Twitter, could not have imagined a better platform to stay in constant touch with her fans. The Beatles – or Michael Jackson in his early years – did not have that luxury. Forget Facebook to LinkedIn to Pinterest to Instagram, even cable TV was in its infancy.
Technology has evolved. And with it our culture. New avenues have opened up for personal brand-building, particularly online. If successful, it has plenty of perks.
Again, going back to where our discussion started, there is a reason why Zero Hedge put Mr. Greenspan’s oil comments in the headline. And there is a reason why I clicked on it. In that same interview, he also talks about falling productivity, etc. But that headline probably would not have generated as many clicks. This factor is not lost on guests.
In the meantime, investors have a difficult job of separating the wheat from the chaff – differentiating between genuine messages and ones designed to grab the reader’s/viewer’s attention.
Is the headline of this post provocative enough? Will find out. Let us see if I will pick up some Twitter (or StockTwits) followers 😉
