Rick Santelli vs. the Talking Heads

Today’s pro-Fed vs. anti-Fed showdown on CNBC was highly entertaining and highly infuriating all at the same time.

Here’s the problem with the closing argument:

Those that argue that ‘the market has risen ergo the Fed has succeeded’ not only misunderstand the role of the Federal Reserve (as Santelli pointed out), or to whom the benefits of stimulus flow (ie: the 1%), but completely misunderstand the nature of market dynamics.


Bull markets are common.  Crashes are rare.

Markets by their nature trend upwards slowly and over long periods of time.   Crashes on the other hand are highly unpredictable,  extremely rare and incredibly devastating events.

On any given day in the marketplace, the bullish argument will appear to be the correct one.  Those that point to current-performance and say “see?” display an ignorance of market dynamics and how crashes work.


“A flimsy house in an earthquake zone”

Imagine arguing with a man who had built a flimsy wood house in an earthquake zone:  For years his argument may appear to be the correct one:  Just look at how much money he saved vs. your expensive steel-framed monolith.   You’d be hard pressed to convince him that you were right.  And with every day that passed, he’d value his side of the argument more.  And yet you who built responsibly, knows with certainty that the other man is an idiot. He may get lucky for a very long time.  But if one views the life-span of the man (or his flimsy house) in aggregate, he has a high likelihood of catastrophe.  When you argue, the argument unsurprisingly goes nowhere –and comparing your experiences “to date” only makes the discussion more useless.


…But we do know what’s going to happen.

What we know unequivocally in the case of markets: The rare event will happen.

If we may quote Zerohedge’s highly appropriate tag-line:  “On a long-enough timeline, the survival rate for everyone is zero“.

Santelli has it right.

Unfortunately his arguments were over the heads of the manicured studio crowd — who ran back to the safety of their two manipulated metrics:  inflation and unemployment.

This argument wasn’t worth having.   Rick, you’re right.

Just wait.




  • Inez Babington

    The gods “cursed” Cassandra with the gift of prophesy:
    The curse was that the more accurate her predictions, the less they were believed.
    I am dumbfounded at the smug critics of Santelli, and everyone else who sees the crazy train coming and is belittled by their ‘peers’.
    Why is Madhoff in jail, while Yellen oversees a Ponzi scheme that far surpasses anything Madhoff offered to his clients?

  • g13man

    look for companies in dicline and short or PUT them . if the collapse happens , you will win big fast . If not , your put could still work since the company is already going down

  • Joe_in_Indiana

    Just found you myself. will now follow. Have a twitter handle?