Friday, October 9, 2015


I use this space to ramble on about things that are kind of off topic, but may still interest people in the financial world. These Instablog posts are just to provoke thought, not convince people of anything.

People who are unfamiliar with Zerohedge probably have no idea what a zerohedge is. Zerohedge is a website that takes a dim view of modern economic practices. The name also refers to the guy who runs it, Tyler Durden, but it's kind of an all-encompassing word for "anti-establishment economic hard-headedness."

I'm not endorsing Zerohedge (apparently it's two words, though not in the url, so most people just type Zerohedge) or dismissing it/him (I'll just call it "it" for convenience). However, Zerohedge is a fact of the Internet, and I may as well comment on it and give my thoughts because, well, that's what I do here.

Zerohedge is the People Magazine for the Tea Party financial crowd.

My take on Zerohedge (and everyone familiar with it has their own opinion, many of which I couldn't put down here) is that it is a useful tool for understanding some of the mechanics of the financial markets. Tyler doesn't actually write most of the stuff that appears on there, he gets some very top-notch guest columnists who really know what makes things work. But they all have the Zerohedge spirit.

I like to learn things about the markets, so I do read some articles on Zerohedge. While many of the articles are extremely dense and often, dare I say it, difficult to follow (these guys are not writers, they are bankers and economists), there are nuggets of truth buried everywhere.

In a way, the articles on Zerohedge tend to be financial geek rants. Now, there's nothing wrong with that. Everybody has to let off steam. You can learn a lot from someone who is ranting, especially when they are inside the system itself.

However, and this is a big however, the predictive value of Zerohedge is near, well, zero. If you believed everything published on Zerohedge, even by the biggest names (and they get real big shots to write there), you'd have cashed out every penny you owned and stored it as gold in the basement long ago. QE long ago blasted inflation to 50% and rising, Europe collapsed by 2012 due to Greek and Spanish bonds becoming unmarketable, and so on and so forth.

Basically, everything that is done by the Fed and big banks and just about everyone else with power in the financial world is a catastrophic mistake in the Zerohedge world, done for venal purposes to keep the dying machine running until everyone involved is retired (like Ben Bernanke). And the worst part is, they all know what they're doing, they know it is catastrophic, and they do it anyway.

That is Zerohedge in a nutshell.

As I said, you can learn a great deal on Zerohedge. The added bonus is that it has great amusement value if reading about how global bankers create billions of dollars with a few keystrokes strikes your funny bone (and I do find some of that amusing).

However, the modern financial system is such a large and complex machine that, even if everything printed on Zerohedge were 100% accurate and happening exactly as they say, the people running things could still keep the whole edifice afloat using all sorts of tricks. There may be a piper to be paid at some point, but he hasn't started, well, piping yet.

So, there's nothing wrong with Zerohedge, as long as you take it in the proper skeptical spirit. If anyone has any idea what I'm talking about, feel free to leave a comment below.