When Practice Doesn’t Support Theory – I Call Reinhart and Rogoff

by Lee Adler, Wall Street Examiner

Due to my jury service on Monday, I have been a little behind (wink), and have not been able to produce a weekly Fed Report for Professional Edition subscribers this week. That’s a good thing because I have a lot of splainin’ to do and need the extra time to think something up.

If the market should break down here it would make my long held ideas about central bank liquidity driven markets look wrong. Therefore a breakdown is impossible since my theory is correct and immutable.

However, just in case the market does break down, I called Ken Rogoff and Carmen Reinhart for advice. They told me to make it look like a spreadsheet error. You can always add them after the fact and no one will be any wiser for it. Also, be sure to allow a disinterested third party to discover it. That way it looks like an honest mistake that you only discovered when someone else pointed it out. You should also hold fast to the theory even though the data doesn’t support it… because it’s a theory… and it’s good.

Since that excuse is already taken, I figured that I’d better come up with a different one. Alright, I’m working on it, but it’s taking longer than I thought it would. Still, I promise to do my darndest to accelerate both the Treasury and Fed updates this week, because I’m probably even more curious that you are to see what the data looks like.

I think, if the market does break down, I will just fall back on my intellectual hero godfather, Yogi Berra, who said,

“In theory, there’s no difference between theory and practice, but in practice there is.”

He also said,

“It’s hard to make predictions, especially about the future.”

And I would leave it at that. I’ve gotten many things right here in these past 13 years.  So it’s about time the market rose up, bit me in the ass, and made me eat a little humble pie.

In that case, this is my advance apologia. Apologizing, making excuses, and sticking to your guns even when you’re proven wrong is very important for success in this world. The more you do it, the more reporters quote you, and the more you get your mug on TV. Notice I said mug, not “mug shot.” That’s the way it should be, but we live in a parallel universe where the intellectual muggers get rewarded instead of punished, or at least ignored.

See, I’ve studied Ben Bernanke, and he’s constantly making excuses for all the shit he’s gotten wrong. Apparently the important thing isn’t getting things right, it’s to stick to your theories and make lots of excuses. They teach that at Harvard, MIT… all those famous Phd mills. My father, may he rest in peace was right. He said that

• BS= Bullshit.
• MS= More shit.
• Phd= Piled Higher and Deeper.

It’s lessons like these that get us through the tough times.

Thank you for your patience and support, in this, my hour of trial and tribulation.

Meanwhile, technical analysis, while a little murky over the past few days has given us some guidance about what to look for. This Professional Edition market update has the details.

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