We all know the mainstream consensus is wrong, but what about the non-mainstream consensus? Maybe it’s equally misguided.
There are a variety of consensus views floating around the Mainstream Media and the blogosphere. The two sets of consensus don’t align on much, as might be expected: the financial MSM is still spouting the Federal Reserve/Wall Street’s “happy story” about how the recovery is weak but muddling forward with “uneven growth” (i.e. someone else got laid off, you still have a job) but corporate profits (the only metric of “growth” that counts) will still be rising forever (as usual).
Liquidity moves markets!Follow the money. Find the profits!
The financial blogosphere consensus is more or less that the fiscal-stimulus/Fed-goosed “recovery” is obviously rolling over here, and since inflation and fear are baked in, gold will continue its steady climb towards $3,000 an ounce and beyond. Oil, meanwhile, is poised to rise as suppliers either lose production to depletion or ratchet production down to support prices.
We all know about confirmation bias, the tendency to seek evidence which supports our views after they have hardened into conviction.
Seasoned traders practice the opposite: they actively seek out arguments against their current views. If these “Devil’s Advocate” arguments are more compelling than their current convictions, then they change their minds and their trading positions (or at least slap on a nice thick hedge).
Which leads me to play Devil’s Advocate: what if both consensus camps are wrong?