One Year Anniversary Of The 41 Untruths Perpetrated By Wall Street

Today is the one year anniversary of a post highlighting many of the themes talked of on this blog since its inception - The Top 41 Untruths listed below. The anticipated outcomes and themes we have discussed over the years have never changed. If the data changes, the themes will change. But, that hasn't happened. When you read the 41 Untruths, or for many, re-read them, remember over this past cycle almost every single economist, financial pundit and Wall Street talking head, be it bull or bear, were hyping some or all of these untruths at one time or another. In fact, on many of these untruths the hype was so overwhelming that it was nearly impossible to find a single person with a microphone to dispute them.

It is easy to look back a year ago and question who was saying what. In fact, it is easy for one's mind to play tricks and believe the environment was already very dour a year ago. But remember, the original posting of the 41 Untruths was posted just days after the U.S. and most global stock markets had reached all time highs. Wall Street was living large and politicians & business leaders around the globe gloated of how their brilliant policies created economic vibrancy that would last for years to come. At that time anyone espousing counter positions to many of these points was considered negative, a goof or even a fool. Yet once again the prevailing beliefs were completely wrong. And, because society cumulatively believed them, it will be society that pays the price.

Top 41 Untruths Perpetrated by Wall Street

1. We will get a healthy and much needed 10% correction and restart the second phase of a multi-year bull market
2. Buy this dip because because earnings were great
   
3. There is too much global liquidity for the markets to go down
   
4. Interest rates must go up to kill the commodity run, inflation and the global equity markets
5. China is an economic miracle
6. The 21st century is the Asian century
   
7. The U.S. (and I guess by implication all democracies) has lost its economic leadership
8. The stock market is cheap
9. Risk management.....Well, need I say more
10. Continued globalization is a foregone conclusion
    
11. Emerging markets and (Brazil, Russia, India, China) are a safe havens while the U.S. economy and dollar craters
    
12. American manufacturers cannot compete and offshoring or doom is inevitable
13. The dollar is doomed because America is a land of spend happy dunces
14. Capital equipment spending will rise from the ashes and drive us to a new bull run
15. The Federal Reserve will save the economy and by implication the stock market when they cut rates
16. Financials are defensive stocks because they pay a dividend
    
17. Defensive stocks are a great investment in any coming market decline
18. Inflation is out of control and interest rates must go higher
19. This has been the best global growth story ever and it's unstoppable
20. The American consumer and the housing market are the major concerns behind a recession. (They are symptoms.)
21. Oil is at a permanently high plateau
22. Commodities are in a twenty year bull market (Maybe many years of yo-yo action)
    
23. The rest of the world will pull the global economy through US weakness
24. Global companies get more than half of their earnings overseas and that makes them a great investment
25. There is always a bull market somewhere. (Yeah, and it will likely be in the U.S. dollar comparatively)
26. Sentiment is too bearish for the market to sell off
27. The U.S. doesn't drive the global economy any more
28. Markets must exhibit mania and blow off to have a peak (That's double speak for people who don't know what's going on and they need a sign from God to see a market topping)
    
29. The Federal Reserve is printing money (Total baloney)
    
30. Alan Greenspan caused all of this (Although he didn't help)
    
31. Goldman Sachs is a great investment
32. This can't be a top because Goldman is levered to the hilt
    
33. Wall Street is smart money
34. It is different this time
35. The real estate slow down will be contained
    
36. The US is a service economy and manufacturing doesn't matter anymore
37. The consumer loves high gasoline prices (or more eloquently spoken by Wall Street as high oil prices haven't hurt the consumer)
38. Unemployment is at 4.5% and by implication the economy is great
39. Apple and Google are the next great thing and deserve their stratospheric valuations (As I said before, I'd rather own all of the equities in Thailand than Google for the same sum of money.)
    
40. The Fed equity valuation model tells us the market is very undervalued
    
41. This final one is for emphasis and has actually been discussed above: the dollar will crater if the Fed cuts rates.