Director MBMG Investment Advisory
The Year of the
Jon Ronson’s 2004 book ‘The Men Who Stare at Goats’ was
subsequently turned into a film starring George Clooney, Ewan McGregor,
Kevin Spacey and Jeff Bridges which opened with a slide that read, “More of
this is true than you would believe”.
The book, which details the adoption of unorthodox ‘new earth’ strategies by
the US military, derives its title from a US military experiment in which
agents tried over several years to develop the power to cause de-bleated,
crippled, shackled goats to die just by looking at them. The book claims
that maybe one goat might have been killed during all that time and that
maybe the heart rates increased of hamsters that were subject to similar
So what’s that got to do with global markets in 2014 - especially when the
pre-occupation in the Chinese New Year of the Horse is likely to be with
bulls and bears?
Well, economic policy since the Global Financial Crisis seems to have been
driven by the central banking equivalent of men (and women!) who stare at
goats. The entire quantitative easing (QE) programme is every bit as
ridiculous a leap of misplaced faith as anything in Ronson’s book. Just
because people believe that they can use bizarre powers to make things
happen doesn’t necessarily make it so.
Since 2009-10, we’ve seen a stall in the very limited global recovery,
glossed over by the performance of equity markets. Real indicators, however,
show the global economy to be both very weak and deteriorating. Meanwhile,
economic fundamentals, primarily the debt problem, continue to worsen.
The stock markets’ strong performances come mainly from America, China and
latterly Japan’s frantic printing of money. More than 100% of the gains on
the S&P 500 index since 2008 have been racked up during periods when there
were QE programmes running. In the non-QE periods, markets fell.
Forcing equity markets higher by force-feeding them liquidity is a central
banker’s equivalent of staring at goats - they believe that by forcing asset
prices higher they can encourage debt-strung economies to rebound despite
all the evidence to the contrary.
It may well be that central banks prove to be more effective than the
military were at hiricide - after 5 years, we should at least get closer to
the answers in 2014. If the experiment does work, then we’ll all have to
recalibrate our thinking to accommodate a totally new economic and
investment paradigm, one in which staring at economic goats does work.
My gut feeling is that 2014 won’t be the year when the experimental monetary
and fiscal policies of the last 5 years are vindicated any more than it’s
shown that we can kill goats just by staring at them in the right way.
However, the men who stare at goats may not be ready to throw in the towel,
no matter how badly they fail.
The book makes it clear that when their counterparts failed, they decided
that it was something to do with the wrong stare or even the wrong goats and
not that the premise was in and of itself ridiculous. The likeliest outcome
in 2014 is continued and increasingly obvious economic malaise, accompanied
with ever more creative reasons as to why the economic goat hasn’t died yet
but, with a few tweaks, will do so.
MBMG Group Investment
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