When Confidence Crumbles

Once again we awake to an array of seemingly contradictory news and reports across the spectrum. Whether it be Ebola, the financial markets, or just plain ordinary life in general. It seems everything is once again in turmoil.

The issue at hand is migrating from worrisome to darn right alarming. And that’s not counting the general public at large. That speaks directly to the very one’s trying to re-establish confidence.

Today, what was once presumed as “a troubling situation in competent hands.” Now appears more inline with the space between “in” and “competent” being a typo.

The confidence in the people who are supposedly, as well as supposed to be “in charge” is doing more than just dwindling. It’s crumbling in Humpty Dumpty like fashion. For no matter how they try – it too may never go back together.

Once confidence wanes, or is lost, regaining it can be just as monumental of a task than the actual crisis itself. In particular it’s in the manner of reflexive or reactive assumptions that are communicated, along with conflicting assertions made by the very people trying to instil it – that diminish it. For it too can not only feed upon itself as not helping in real-time, but rather, hurting any and all credibility moving forward.

Sometimes no amount of “rights” will affect the one impression held by the public which you made wrong. Once it’s lost sometimes no amount of words seems to help. In fact, more words can actually make matters even worse. Sometimes – much worse.

This in turn is the exact tipping point where politicians, academics, et al find themselves not only up against a rock and a hard place, but also looking down the hillside where torches and pitchforks are advancing up the once presumed impassable slippery slopes.

The more they try to calm the public with words or speeches, the less anyone listens. For they believe they knew (as well as still know) all they needed earlier. And all of that has been shattered.

In other words: All that was told to them prior acts as the very foil as to not believe anything else. Regardless be it the truth – or not.

A great example of this paradigm can be found in Taleb’s book, The Black Swan:

“When you develop your opinions on the basis of weak evidence, you will have difficulty interpreting subsequent information that contradicts these opinions, even if this new information is obviously more accurate.” -Nassim Nicholas Taleb, The Black Swan: The Impact of the Highly Improbable (2007-Random House)

Here is where things get unusually uncomfortable for both those in the positions of leadership, as well as those that are supposed to follow their guidance. For when it’s shown what you’ve told proves out to have been nothing more than an exercise in how well one can spin the specious? They wont believe you – even when you speak the truth. And there in lies the explicit danger.

Nothing in recent memory is showing just how precariously close we are in an outright confidence crisis than the memes being unraveled in dramatic fashion today.

One need look no further than the financial markets to get a dose of reality where the contagion of both Ebola as well as The Federal Reserves omnipotence is disrobing for all to see. And the picture isn’t pretty.

Suddenly what many would describe as “out of nowhere” the markets fell wiping out a years worth of gains (and for some individual stocks far more) in a matter of weeks. And for others – just days.

Then with what mirrored this “out of nowhere” interpretation; the markets bounced and rallied. But (and its a very big but) rallied to where? Higher? As in back to new all time never before seen in the history of mankind new highs as had been the case every other time? Nope.

It would seem the “Fed’s got your back” meme now means – only so far. Because what was demonstrated by anyone that cared to truly look was it was nothing more than jaw-boning for effect. And how long its effect lasts is truly up for grabs. Maybe months, maybe weeks, maybe hours, and maybe – it’s already over.

The only thing that stopped the markets from what many could see as the precipice of an outright calamity was the revelation from St. Louis Federal Reserve Bank President James Bullard with a comment where he interjected his view, (I’m paraphrasing) “The Fed. should consider delaying the end of its QE program to halt a decline in inflation expectations.”

Suddenly the markets in a headline reading, algo fueled, HFT tsunami released wave after wave of stop running buy orders sending stocks rocketing higher in such a dramatic fashion it was touted as one of “Wall Street’s best days in years.”

All because of a great economic report? A great earnings report? A great _________ ?(fill in any economic indicator you like here) Once again sorry, but no.

It was all initiated because someone at the Fed. posited in public that maybe QE should continue. All I can say to that is welcome to your new “economic indicator.”

However this indicator says more about the reality of the markets today than the picture of confidence and stability they keep trying to convey. What’s at issue is; this won’t work when it’s no longer believed by the algos, let alone anyone else.

Truth is the machines can and will be fooled – but only for so long. For it doesn’t take a programmer to realize words from a non-voting member means little more than the cause or effect of a one day headline. For unless Ms. Yellen says it – it’s now yesterdays news. Regardless of how newsworthy or market moving it seemed at the time.

We’re watching this play out and how it may portend to events coming here in the coming days with another once reliable headline market moving wordsmith, ECB president Mario Draghi.

Mr. Draghi’s market moving line of “whatever it takes” seems now to be taken by the markets in the vernacular – “What-e-ver.” For the markets in Europe are also showing signs of great unease. (Personally if I hear that supermodel Gisele wants to be paid in anything but euros? All bets are off!)

Now there are a great many people both here as well as abroad suddenly paying attention and watching their money vanish in a fashion unseen since that which shall not be named. i.e., The financial crisis of 2008.

Today many of the so-called “smart crowd” are finding themselves once again in the all too distant past of near forgotten question and answer debates with clients reminiscent of that period.

Customers will sit with expressionless faces as they wait through the never-ending platitudes of, “Invest for the long haul; This is a buying opportunity; If you loved them at the highs you should love them even more now; Stocks are on sale!” etc., etc.  Only to then hear that dreaded response that chills their blood faster than a margin call on Monday: “Sounds great…Can I have my money now?!”

I would bet dollars to doughnuts a vast majority aren’t going to take the chance let alone have the confidence as to just let their “money ride” once again. Regardless of how much “confidence” one wants to shout into the camera on a trading room floor.

Just as previous outflows show – nothing will change their minds. Many never came back to begin with, while those that still remain will themselves be looking for the exits.

And that alone poses extreme difficulties for the market as a whole in the coming weeks and months; let alone years.

Add on top of this? The never-ceasing contradictions availing themselves daily when it comes to Ebola.

It has gone from “Don’t worry, we got this!” to “Who’s got it and where?” to now “What do you mean I might get it?!!!” The confidence around this whole containment facade has crumbled so fast it’s a wonder it stood at all.

In less than a week we have gone from contained to now verified reports the actual agency responsible for that assurance of containment not only dropped the ball, but actually gave reassurance to first responders in direct contact with the first ever documented patient with Ebola on U.S. soil permission to travel via commercial air.

As much as the moniker “you just can’t make this stuff up” fits, add too this the surreal news where another of these individuals (one that actually handled samples) is now traveling aboard none other than – a cruise ship!

Officials have been falling all over themselves and answering questions with such contortion twisting phrases it would make a carnival worker blush. (that irony is not lost on me)

It is also absolutely ironic and jaw dropping that the very officials in charge of containing the spread of such a deadly disease who have stated over, and over, and over again that “banning travel or entry onto U.S. soil is not helpful in helping containment” is finding that every country they ask for permission to use their air, ground, port, whatever flat-out says: No!

Can one imagine what it must be like for the well over 1000 passengers and crew aboard that ship now put back out to sea knowing full well they were not only forbidden from disembarking for fear of contagion, but rather they now have to turn around and sail back aboard that very ship along with the possibly infected passenger!

What happens to all those people once they return? And how is this ship’s arrival going to be portrayed in all the media upon that arrival?

This will shatter people’s perception of confidence if the television news follows that white cruise ship into port in any way reminiscent of the way they followed the white Ford™ Bronco down the freeway.

How does one think this looks to all those that believed (or at the very least fooled themselves into believing) “The way to ensure containment is by not isolating us from it. That’s why we need not restrict air travel or anything else that could help inoculate us from spreading it within our own population.”

Just when you think it can’t get more Keystone Cops-like we wake to just the latest version of “are you kidding me?”

In a show of what was touted as “helping to instil confidence” it was announced the President via an executive action created the position of an Ebola Czar naming Ron Klain to that position.

Forget the left-right politics of this. That’s not what I’m talking about. What is glaringly, mind-boggling, absolutely surreal about this appointment is in the fact that by all accounts and reports he has no medical, healthcare background.

What is also being reported is that he was picked because in effect – he’s nothing more than a political insider. But rest assured he can get things done because: he knows how Washington works. Again “are you kidding me?”

In my opinion what’s needed right now if there was any chance for building on any remaining credibility or confidence would to have at the very least chosen someone channeling both the demeanor as well as the military uniform with all the accoutrements of former U.S. Surgeon General C. Everett Koop.

Why this position wasn’t demanded to be filled first before a calling for anything or anyone else has not been lost on a great many.

As bad as this blunder is in the ever-growing list of missteps, I believe there is one that shakes any last remaining confidence right into the abyss.

For one doesn’t need to know anything more than when a press conference is called by the President as to make an available photo-op session for the press to use as to help quell any and all questions or concerns. The one thing you do as your first duty as the newly appointed “Czar” is to show up!

For the picture of the President there alone without him regardless of the room being filled with others speaks more than the words conveyed by the picture itself – It screams volumes so loud one can’t ignore them.

You can be confident in that.

© 2014 Mark St.Cyr