The quality of our discourse is decaying. This was once a standard complaint about the tone and depth of our national political debate. Now it has spilled into the financial realm.
Shall we blame Twitter, trolls or bloggers? I am unsure of the underlying reason. But as we have seen far too, financial discussions seem to entail people arguing at cross-purposes. Bull-bear debates devolve into winning the argument at any cost. Previously, we had a true competition of ideas in the marketplace. Now, we have discussions that range between disingenuous and useless.
The hunt for the truth has been replaced by the search for bragging rights.
Price discovery, like so many other things in our society, depends on a robust and open debate. The intellectual arguments can and do sway investors about their investment postures and positions. Efficient markets eventually find their way to proper pricing, but that “eventually” can take a long time. As John Maynard Keynes observed, “Markets can remain irrational longer than you can remain solvent.”
Perhaps a few examples might illustrate the point. In discussing the debate over gold, money manager Ben Carlson observes:
Gold is down almost 40% since it peaked in 2011. But it’s still up almost 350% since 2000. Although since 1980, on an inflation-adjusted basis, it’s basically flat. However, since the early-1970s it’s up over 7% per year (or about 3.4% after inflation).
If you want to have an intellectually dishonest argument about gold, simply cherry pick the time line that supports your argument.