It doesn’t matter what you are talking about – the dot com crash, the subprime crash, or the tulip bubble. The years after such a crisis are marked by protestations that nobody saw the crash coming. In fact, those protestations are almost always false. True, almost everyone did drink the Kool-Aid, but there were always those that said: “No thanks!”
One of the good things about CNBC is that it creates a record of these events. They know who drank the Kool-Aid and who did not, and they have it on tape. When Peter Schiff was running around telling people that the subprime bubble was the biggest bubble of all time, both CNBC correspondents and their guests howled with derisive laughter. The Daily Show was kind enough to put together a collage of these interviews, and you can see that he was telling the straight story and was being treated like he was a total clown by people who were being total clowns themselves at the time.
Peter may not be the most charming person you ever saw on TV, but even if he had been wrong, he would have deserved significantly better treatment. Given the fact that he was right and his detractors were nothing less than fools, you would think there would have been quite a few public apologies, but I guess Wall Street doesn’t work that way. While lots of people on Wall Street are wrong most of the time, admitting in public that you were wrong is rather exceptional behavior.
There’s always a Peter Schiff, the guy who has it right. He’s always going to be the one who says the bubble will burst, and the guys who have it wrong will be saying, “that will never happen.” The guys who have it wrong are almost always hoping that it will never happen, but most of them don’t believe in never any more than you or I do. They mean “That just can’t happen while I am making all of this money.”
You should pay close attention whenever you hear that phrase or anything like it on CNBC, The more times you hear it said about any possibility, the more likely it is to happen. Wall Street should keep a “That will never happen” Index so that we could all track these events. They wouldn’t be talking about it if it wasn’t a possibility, and the more they talk about it, the more likely a possibility it has become.
Does that mean that any particular disaster will happen in a predictable time frame? Not necessarily, there are a lot of People that always say things like Peter Schiff, and most of them are wrong far more often than they are right. However, if the doomsayers are talking about your favorite investment or something that directly affects your favorite investment, you do need to sort through the doomsayers with an open mind. You don’t just want to say “That will never happen” or you soon may be saying “Nobody could have seen this coming.”