Live: ASX slips, China’s COVID-hit economy slows down as its population shrinks

Good afternoon, a little guest post from me on a highly entertaining research note that dropped into my inbox this arvo.

Rabobank global strategist Michael Every is one of the world’s more colourful market analysts.

In today’s missive, he warns about the conflicts of interest inherent in so much investment and economic advice that gets dished out:

“Talk to anyone on the equity side: isn’t it always time to buy equities? Because if not, there is less need for equity people. As a result, isn’t the ‘wisdom of that crowd’ biased?

“Talk to anyone on the gold or crypto side: isn’t it always time to buy gold or crypto? Because if not, there is less need for gold and crypto people. (And indeed there are now many fewer crypto people.) As a result, isn’t the ‘wisdom of that crowd’ biased?

“Talk to anyone on the traditionally staid bond side: isn’t it always shortly time to buy bonds too? Because higher yields destroy a financialised, highly indebted economy, what goes up must always come down. Because if not, there is less need for bond people telling you that. As a result, isn’t the ‘wisdom of that crowd’ biased?

“Talk to anyone in economics: doesn’t inflation always return to the central bank target of 2%? That’s the thought process as well as the function of their DSGE models. Because while this may not mean less need for economics people, it does mean more need for a different kind of economist — one who understands political economy, or logistics, etc. Indeed, saying inflation doesn’t come down means admitting the whole economic paradigm has changed. And what do you do when you only have a hammer and a screw, or a rawl plug, not a nail? As a result, isn’t the ‘wisdom of that crowd’ biased?”

He then compares this “biased” advice to a three-year-old’s dinner requests:

“In short, asking markets about the inflation and rates outlook, when so few in markets are truly neutral, is like asking very small children what they think is going to be for dinner: it’s always going to be chocolate and fries. That’s what they actually think, because that’s what they want it to be.

“So, is it worth listening to ‘the wisdom of crowds’? Yes, because you get trampled if not. And no, because no matter how much you want chocolate and fries for dinner when you are 3, the odds of your parent putting that on the table every day are fairly low.”

Every concludes by giving his own thoughts about what to expect this year:

“So, what’s for dinner tonight? Volatility. It’s just still in the oven.”

It also tends to come out piping hot, burning a few fingers along the way. Not to mention catching a few investors with their pants down.