Zero Hedge is a model publisher for 21st C America. Be afraid.

Larry Kummer, Editor

9 years ago

Summary: Perhaps Americans cannot regain control of our nation because we’re lost amidst a wilderness of mirrors, and so unable to clearly see the world. Here’s an example of the fun house media that increasingly dominate web publishing. We choose them over less entertaining but more accurate sources. The cost of doing so is high. {2nd of 2 posts today; I said there would be only one, but this was too easy.}

The secret to success on American media is to run a fun house. Provide entertaining news that is irrelevant to our lives, and distorted to fit to our tribal truths. Few show this better than Zero Hedge (subject of several debunkings here). Investment success requires a hard and cold view of the world, uncontaminated by cant and ideology. Yet ZH provides a flow of cartoon-like stories (plus otherwise difficult to get research from the major Investment Banks and real-time news about breaking news). Its fantastic success both proves that the models of equity research and news publishing are broken (I do consulting in this field, providers refuse to see this as their business dwindles).

Let’s see some examples from ZH today, other than their gold-buggery and conspiracy-mongering.

“Why Moar QE Is Inevitable (In 2 Simple Charts)“

ZH has been predicting another round of quantitative easing since the Fed announced in June 2013 that they were ending QE (they ended it on 29 October 2014). They have been wrong about this since the economy has continued to grow (which they often deny, even mock).

Worse, they have argued that the economy is not growing — or about to fall into recession — for years. This ignores one of the major economic stories since the crash, the continued slow growth of the US economy. Doesn’t crash, doesn’t “take off”.

“Here Is The Flashing Red Light In The Inventory-Sales Ratio“

“And guess where inventrories {sic} are soaring the most…”

Typical ZH: not wrong, just misleading. ZH has been blowing their horn about rising auto inventories for many months, but the all-important inventory to sales ratio announced today for autos has risen from 1.60 in May 2014 to 1.64 in May 2015 — up only 2%. Auto sales rose +8% YoY while inventories rose 12%. The auto apocalypse has been delayed.

What’s driving the increasing total inventory/sales ratio, which has increased from 1.19 to 1.29 over the past 12 months (+8%, a large rise)? Metals, hardware, machinery, apparel, and especially petroleum (sales -33% while inventories -33%). Nothing likely to sink the economy.

Just one example of ZH conspiracy-mongering

“How The SEC Engineered Every Stock Market Bubble Since 1982“. Now you know!

From yesterday: hysteria about system outages

The NYSE was down for 4 hours. Readers of ZH learned that it might be a devastating attack by our foes, if not the apocalypse: “Is This What The First World Cyber War Looks Like: Global Real Time Cyber Attack Map“. Classic ZH: clickbait title, carefully worded article (“some say”).

Since the NYSE trades only 14% of America’s daily equity volume, it was a blip. No, there was no World War Cyber. But ZH thanks you for the clicks!

The big tilt

The most serious effect of ZH on reader’s minds results from the highly filtered information flow they give: all negative, all the time. For example, during the first quarter they updated readers frequently about falling estimates of Q1 GDP. The GDPnow model of the Atlanta Fed was a staple of bears in Q1.

For some reason readers of ZH seldom see it in Q2. Their most recent nowcast, on 7 July: looking good.

Update: an example of good reporting on ZH

“Q1 GAAP EPS Lowest Since 2012: The S&P500 Is Now Trading Over 20x PE Using Unadjusted Earnings” — This discusses an important story, based on a Bloomberg story and Deutsche Bank research. These ZH articles are useful to read, so long as one knows that they show only the bearish side of reality.

Conclusions

ZH is an ugly version of Wal-Mart or Amazon. It would be sad but insignificant if ZH was exceptional. But ZH is a model of successful web publishing, probably taking mindshare from mainstream providers of economic and market insights. I see websites using its methods proliferating in other fields. For example, geopolitics has become dominated by sites that provide a continuous stream of threat inflation as ludicrous as the worst of ZH.

I do not understand the causes of this trend, or what need these fill for their readers. I suspect (guess) that these provide entertainment and a feeling of engagement for the America’s outer party (managers and professionals). Since they’re largely passive, their distorted view of the world has no consequences for them. It makes them easy to manipulate, and erodes our collective ability to run America.

The 1% have reasons to despise us, and believe that they can better run the nation. We have the ability to prove them wrong, but lack only the will.

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