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Nouriel Roubini and His Acolytes
Following the incredible popularity of my post “Is Nouriel Roubini a False Prophet?“, I’ve decided to do a little introductory lesson for those more interested in avoiding charlatans …
Cold Reading is a primary set of techniques employed by phony psychics and market prognosticators. When cold reading, the primary objective of the sender is to ensure that the recipient perceives the statement/prophecy to be a hit. Here are a few classic techniques used by Ms. Cleo and Nouriel Roubini:
TECHNIQUE 1. The “Rainbow Ruse”: Indicate one trait and, at times, the opposite.
For example: “The bad news out of the financial sector will continue to flow, and on the days that it does, the market will take a hit,” said Chris Johnson, chief investment officer at Johnson Research. “But select stocks will outperform the rest of the market,” he said, “particularly in technology.”
“Robert Loest, portfolio manager at Integrity Funds, said that a late December rally could depend on what the Fed does on Dec. 11.”
TECHNIQUE 2. “Barnum Statements”: General statements that fit most people (can also be combined with “Forking” — see below).
For example: “I think we’re going to have a tremendous amount of volatility and basically stay in a trading range until we get information on first-quarter earnings,” said Dan Genter, president at RNC Genter Capital Management.
TECHNIQUE 3. “Fuzzy Facts”: General broad statement likely to be right.
For example: “An end of the year run is not necessarily off the table,” said Art Hogan, chief market analyst at Jefferies & Co. He said that Wall Street still needs to work its way through a lot on the financial side. Yet, the broad selloff of recent weeks may have primed stocks for a bigger bounce back, particularly in the areas of the market that are unaffected by the credit market mess. “But there’s no question of volatility,” he said. “It’s going to be very bumpy through the end of the year.”
TECHNIQUE 4. “Good Chance Guess”: Like a Fuzzy Fact, these are guesses as to facts which are highly likely to register a hit.
For example, a psychic might say, “I see a blue car,” or “a house with number 2 in address,” or “I see a painting on the wall, it might be of somebody who has passed or somebody who is alive, I’m not sure?”
TECHNIQUE 5. “Lucky Guess” / “Forking”: A compounded guess — one that contains 2, 3, or more parts.
If one guess is a hit the recipient will typically say “wow,” even if the others were a miss. This was one of Roubini’s strategies.
For example, “7,000 is going to be a resistance area in the Dow. Otherwise, if it breaks through, resistance should become support and we are next likely to see some resistance at the 7,400 area. If it breaks through there we should see a run at 7,600 and then possibly new highs.”
A subset of this is one noted by Charles Kirk at The Kirk Report: “make so many predictions that you can later say you were right no matter what.” This is Jim Cramer’s forte and most other gurus out there.”
TECHNIQUE 6. “Push Statements”: State something wrong and keep pushing it!
For example, something like “The subprime scare is pushing stocks down and may spill over into the general economy causing recession and global slowdown.”
TECHNIQUE 7. “Russian Doll”: Statement with many possible layers of meaning. Keep working this until you get a hit.
For example, “Market participants were concerned about Wall Street which sold off sharply Monday as concerns about a weakening credit market wiped out investors’ enthusiasm about strong retails sales over the holiday weekend. For a brief period today, there was a twinge of optimism that the stock market would be able to score back-to-back gains. Reports of stronger than expected retail traffic over the Thanksgiving holiday contributed to that view. However, it wasn’t long before concerns about the financial sector (-4.1%) took hold again and knocked the market down to size.”
TECHNIQUE 8. “Peter Pan/Pollyanna”: Tell them what they want to hear.
“After years of living happily beyond their means, Americans are finally facing financial reality. A persistent rise in energy prices will mean bigger heating bills this winter and heftier tabs at the gas pump. Job growth is slowing and wage gains have been anemic. House prices are sliding, diminishing the value of the asset that’s the biggest factor in Americans’ personal wealth. Even the stock market, which has been resilient for so long in the face of eroding consumer sentiment, has begun pulling back amid signs of deep distress in the financial sector.”
TECHNIQUE 9. “Certain Predictions”: Predictions with no time frame.
“The market is very likely to make new all time highs despite the recent sell off.” This was another favorite by Roubini.
OTHER TECHNIQUES:
“SELF-FULFILLING”
For example, the psychic might say, “You will make a new start.” The market commentator might say, “The market may see new lows before turning higher and cause uncertainty among traders creating risk.”
“VAGUE PREDICTIONS”
For example, “The market is now looking toward 2008 and a slowdown, and I find it hard to believe that we can have a year-end rally. But there are some reasons to believe that Wall Street might see a typically upbeat December and an end of the year “Santa Claus” rally.” Clearly, in this case the speaker is predicting A or B and if either occurs they are right.
“UNVERIFIABLE STATEMENTS OR PREDICTIONS”
For example, ex post facto word fitting like “The pull back to resistance level provided support for the overnight rally. The Asian traders encouraged by strength in the yen decided to bid up the SP in the night market.”
Note: These techniques should be differentiated from conditional propositions given by a speaker who tells you what action you should take if X or Y happens. For example, a extraordinary mentor should say, “If the market does X, then you should do why. However, if the market does N, then you should do M.” This way, the speaker is admitting they cannot predict the future, yet are still offering conditional propositions to take beneficial action.
This post was researched by my friend Dan who has a passionate interest in educating people about subversive rhetorical techniques. Thanks Dan!!
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Check out some more thoughts on interesting topics:
Is Nouriel Roubini a False Prophet?
Systemic Risk: Is it Black Swans or Market Innovations?
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Great article. These techniques are used by scammers in every financial arena.
I believe roubini is exactly like what You described. He gets lots of presses, and now he is considered to “market mover” about couple of weeks ago with cnbc. he, cnbc, other mainstream media are very deceptive. He does not even understand that we have “borrowing and consuming” economy. peter schiff was even invited to his school to talk about the root cause of this economic collapse that we are in. great thank to you for doing a great job exposing him, a pseudo-economist. thanks
A gentlemen wrote me an email saying he thinks my article above is “pathetic” for naming Roubini. I understand that a lot of people love Roubini as passionately as those who love Jim Cramer. My purpose is not to offend. My purpose is to continue to shine the light on the type of techniques which have led to two bubbles and two collapses in less than a decade. I am forced to use examples. Roubini and Cramer happen to be real-life examples.
Here is the message I sent to the person who thinks this article is pathetic:
He wrote: “Try taking Roubini apart on what he says, not how he says it.”
As I linked to my first post in THIS article, you can see I already have taken apart what Roubini has said:
http://wallstcheatsheet.com/breaking-news/economy/is-nouriel-roubini-a-false-prophet/?p=1321/
Second, how he says it is very important because he is using specific rhetorical techniques to alter people’s perception of the content of his message. Logic can be a black magic, and it’s important to break down the method of delivery AS WELL AS the content.
In addition to the link above, I have economists and banking analysts from all over the world sending me tons of stuff written by Roubini. They ALL think he’s a disingenuous liar. I didn’t realize my original piece would bring so many people out of the wood-work willing to compile Roubini’s entire bibliography, so I will need some time to condense it all for those who blindly cling to his PR campaign.
I defend my work as straight-forward journalism. All the facts are cited. I may write a book now that so many well-respected people have decided to encourage me.
Lastly, an ad hominem attack is one made on the character of a person rather than the content of his/her message. My post was 100% about the content of Roubini’s message (i.e., he uses highly suspect Cold Reading rhetorical techniques). As I mentioned in my first post, I don’t know Roubini personally (although I have many friends who do) and I don’t care if he is the nicest or meanest guy in the world. The bottom line is he and Jim Cramer ride tides and call themselves the moon.
I am sorry if I offended you. I seriously hope you will open your mind to the complete set of data that exists by Roubini. I promise, there are others who deserve credit for nailing the crisis. A guy who has been bearish forever and predicted all the wrong causes is not exactly worthy of the grand title.
If you are interested in great information from the brightest minds, I suggest looking into Chris Whalen, Josh Rosner, and David Rosenberg to name a few …
Excellent. I’m glad someone else is following this story, because Roubini’s fraudulent self-promotion has been getting on my nerves. I have been keeping an eye on his grandiose but vacuous pronouncements this year. Most of it is obsessive-compulsive factoid-mongering, with no significant meaning or definitive interpretation. But of his definitive statements so far, he has predicted an L-shaped recovery, a U-shaped recovery, a W-shaped recovery, and no recovery. He has predicted everything but a V-shaped recovery, the possibility of which he has basically dismissed. (Mark that). He has covered all of the bases he thinks he might need.
Then he goes around endlessly pushing his propaganda that in July 2006, he predicted the financial crisis. No, he didn’t. He predicted no such thing. He predicted a bear market and a severe *consumer-driven* recession–by the end of 2006. Dead wrong on all accounts. Nowhere in his writings does he predict a credit crunch turned severe panic, the collapse of the entire banking system, the death of legacy institutions, and a recession as a result of that–in 2008. He certainly didn’t predict its cause, so it’s not like he merely mistimed the playout. And he did not predict the turnaround either, although he used vague language to acknowledge some of the positive indicators as they were happening, which he will likely attempt in the future to parlay into one of his “successful predictions.”
The man is a fraud, and his self-promotion is shameless. Normally, I would not care, but he uses it in favor of his leftist politics.
WM,
THANK YOU for your thoughtful response. Seriously, I have banking analysts and economists emailing me from all over the world with tons of material and commentary about Roubini being disingenuous. I did not expect to have so much material sent to me, so it will be some time before I can condense it into another post. However, in the meantime, your points are all fact-based and clearly make the case that there are two Roubini’s: the one he projects to the media, and the one who writes his papers and gives his speeches …
Thanks again. I hope you comment more often!
Damien
There ought to be a registered play-money trading vehicle sponsored by a big name in the securities business (or maybe by the SEC) where persons who want to create a certified prediction track record could do so. If handled properly, it could become so established and prestigious that any claimant to a good trading record who couldn’t cite that service’s documentation of it would be scorned and ignored.
There should be a sister site for predictions on economic benchmarks like the GDP, unemployment rate, etc.
Roger, I could not agree more. In fact, in an article I wrote last month I proposed something similar: a site that tracked all public recommendations by financial professionals and pundits. That way we could more easily see who is worth following …
You can read more here: Financial Media Coup d’Etat
Let me know if you find anything like what you said …
Damien
In a slightly different angle, seeing Paul Krugman have his long opinion piece saying no one could have seen this coming makes ones blood boil. As someone that started studying the stock market in 2002 it was pretty obvious were we were headed (over a cliff) well before it occurred. The stock market told me to get out in Nov 2007 all on it’s own, and hearing Economists claim ignorance when so many others had been highlighting the dangers is pretty disengenuous.
Either these people have never studied history or they are such a club it is impossible for them to not function as lemmings.
Perhaps this will spark a column? Those who saw and those who claim to now lead us forward but never saw what was coming…
For some reasons though the masses continue to listen to the Cramers and Krugmans of the World, so guess just have to follow our own path.
Definitely follow your own path — especially if you got out of the market at the right time!