Guest Post: The Real Testosterone Junkies

Tyler Durden's picture




 

Submitted by John Aziz of Azizonomics,

I especially enjoy reading things that I disagree with, and that challenge my own beliefs. Strong ideas are made stronger, and weak ideas dissolve in the spotlight of scrutiny. People who are unhappy to read criticisms of their own ideas are opening the floodgates to ignorance and dogmatism. Yet sometimes my own open-minded contrarianism leads me to something unbelievably shitty.

According to Noah Smith:

Zero Hedge is a financial news website. The writers all write under the pseudonym of “Tyler Durden”, Brad Pitt’s character from Fight Club. Each post comes with a little black and white icon of Brad Pitt’s head. On Zero Hedge you can read news, rumors, facts, figures, off-the-cuff analysis, and political screeds (usually anti-Obama, anti-government, and pro-hard money). On the sidebars, you can click on ads for online brokerages, gold collectibles, and The Economist.

 

The site is a big fat hoax. And if you read it for anything other than amusement, you’re almost certainly a big fat sucker.

 

That’s a bold claim! Why do I make this claim? Well, in one sense, all financial news is a hoax. Financial news, by definition, is public information — if you’ve read it, you can bet that thousands of other people have too. That means that if the market is anywhere close to being efficient, any information in any article you read will already have been incorporated into the price of financial assets. Reading or watching public information should not, in theory, give you any “alpha”.

 

If the writers of Zero Hedge really knew some information that could allow them to beat the market,why in God’s name would they tell it to you? If they had half a brain, they’d just keep the info to themselves, trade on it, and make a profit! Maybe then, after they had made their profit, they’d release the news to the public (and collect ad revenue), but by then the news would be worthless. Financial news sites, you should realize, are not in the business of giving you insider tips out of the goodness of their hearts.

 

As you might expect, it’s not hard to look back at Zero Hedge’s predictions and see that a large number of them are junk. For example, here’s a bunch of posts from 2009 predicting imminent hyperinflation. Hope you didn’t make any trades based on that bit of wisdom!

 

So how does Zero Hedge get away with this hoax? Barber & Odean (2001) give a big hint. Tyler Durden, whose name and image grace every Zero Hedge Post, is a symbol of masculinity. More specifically, he is a nerd’s imagined vision of what a really masculine nerd would be like. In Fight Club, Durden says: “All the ways you wish you could be, that’s me. I look like you wanna look, I fuck like you wanna fuck, I am smart, capable, and most importantly, I am free in all the ways that you are not.”

 

In other words, you are a young smart (i.e. nerdy) guy sitting at your computer with rivers of testosterone coursing through your veins. And now here comes Tyler Durden, your generation’s Platonic ideal of pure masculinity, telling you that Real Men Take Risks. At the top of the site, there is a Tyler Durden quote: “On a long enough timeline the survival rate for everyone drops to zero.” In other words, gamble. Bet that you’re the smart guy and not the sucker. Because hey, you’re going to die anyway, so there’s no use hedging your bets. Zero hedge, right?

 

I wouldn’t be surprised if “Tyler Durden” were actually a bunch of behavioral finance grad students, snickering behind their hands at everyone who takes their site seriously.

This is what passes for financial analysis today? Let’s ignore the obvious fact that Zero Hedge has never pretended to offer investment advice. We should take all financial news with a large grain of salt (anyone who has read the latest uber-bailout rumours out of Europe should know that). Anyone who bases their trading activity on blindly following the pronouncements of one site, or one trader deserves to lose their coat. Blindly following a messiah-figure or (even worse) the herd is a surefire recipe for disaster.

But Smith has got his facts wrong. While there has been no hyperinflation, those who traded their hunch and bought gold — pretty much the archetypal Zero Hedge trade — have not done badly. Here’s the price of gold — contrasted against the S&P500 — since Zero Hedge was born in January 2009:

 

Drawing a meaty profit and significantly outperforming the S&P500 is hardly what you’d expect from a “big fat hoax”. Certainly, you’d have made a loss, not a meaty profit, from betting with Bernanke’s pronouncement that subprime was “contained”.

Smith is spinning loose psychoanalysis spiced with conspiracy theories and schoolboy misunderstandings in order to generate pageviews. He obviously hasn’t read Zero Hedge enough to realise that ”on a long enough timeline the survival rate for everyone drops to zero” reflects the reality that calamities and resets happen, and that — given the level of mess, corruption and perversity in finance today — a systemic reset could be just around the corner. And the last thing i would want to do in the face of a systemic reset — or any kind of large-scale financial calamity (a la 2008) — is gamble. The smart thing is to hunker down and robustify, by minimising exposures to all forms of connective risk and financial fragility . Zero Hedge is not about having no hedges and gambling as recklessly as possible; it is about having hedges against the system going to zero. 

Ironically, Smith is accusing entirely the wrong segment of the financial world of wild recklessness. While there are surely many day traders who lose their coats on the pronouncements of analysts (especially the Crameresque stock-picker — something which Zero Hedge has never done), the real danger is surely the testosterone-Red Bull-and-cocaine-fuelled TBTF trader or 21-year old PhD-wielding quant working for a bailed-out bank with an implicit taxpayer backstop on zero-interest government money. The level of moral and financial hazard is simply staggering, and of course this has bred much reckless behaviour; from the evident criminality of manipulating LIBOR, to Corzine’s destruction of MF Global (and theft of customer funds),  to the absurd market-cornering London Whale’s speculation using customer deposits, to the off-balance-sheet activities of Kweku Adoboli, to Goldman’s quote stuffing. And — I am sure, much much more — these are just some of the scams and scandals that are known; there is much more darkness beneath. Zero Hedge has been a powerful journalistic force and clearinghouse in bringing the light-of-day onto these corruptions and criminalities, something that Smith seems entirely ignorant of.

No day trader or goldbug stacking gold eagles has ever blown up the nation’s pension fund, but the protected TBTF banks funded by earth-shattering leverage and taxpayer guarantees have again and again endangered retirement funds, and lost their clients’ fortunes.

It is not unusual on Wall Street to see massively leveraged double or nothing Martingale trading strategies where traders take a position and push leverage and counter-leverage to create a favourable outcome. In theory — with unlimited funds — such an approach always wins, but in reality this approach usually ends in traders running out of counter-parties or running out of leverage, and ending up with a massive loss. It’s picking up nickels in front of a steamroller, and is of course made much easier thanks to the new and manipulable world of high-frequency trading.

It’s ironic (and jaw-dropping) that Smith castigates Zero Hedge as the home of testosterone junkie traders when in fact the vast majority of Zero Hedge writers and readers are angling for better regulation of high-frequency trading to prevent market manipulation, an end to nickels-in-front-of-steamrollers strategies (the best way is to end the taxpayer guarantees so that traders who blow up the system will reap the consequences), and the return of Glass Steagall (or similar) to keep depositors’ funds out of hyper-fragile shadow intermediation chains and the derivative casino.

The financial system is being regulated by clueless schmucks — many of whom would also castigate Zero Hedge as a “big fat hoax”, while ignoring grift and degeneracy within the financial establishment and the TBTF banks. In the face of such grotesque incompetence who can blame market participants for wanting a hedge against zero?

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Sun, 07/08/2012 - 17:09 | 2596764 Conrad Murray
Conrad Murray's picture

10BTC to the best deface before midnight eastern. GOGOGOGOGO!

EDIT: 20BTC if it includes Goatse and a rederict to lemonparty. I'm feeling lulzy. Let the good ship sail.

Sun, 07/08/2012 - 17:59 | 2596955 Future Tense
Future Tense's picture

Zero Hedge readers are lighting up Noah's page with arguments against his nonsense.

Sun, 07/08/2012 - 18:03 | 2596967 TrainWreck1
TrainWreck1's picture

Likely the traffic he seeks - troll a high traffic site, and wait for hits.

 

Sun, 07/08/2012 - 18:33 | 2597034 Stackers
Stackers's picture

ZeroHedge stock picks ? Where's the stock picking section I missed it somehow ?

Sun, 07/08/2012 - 19:13 | 2597134 veyron
veyron's picture

I'm disappointed that Aziz didnt connect

"Ironically, Smith is accusing entirely the wrong segment of the financial world of wild recklessness. "

with what's going on with Egan-Jones ... ZH is not alone in this

Sun, 07/08/2012 - 19:33 | 2597166 smiler03
smiler03's picture

Noah is right. I traded on the advice of Graham Summer and now I'm bankrupt to the tune of $10 million. 

What?? You mean I wasn't supposed to take Graham seriously?

Sun, 07/08/2012 - 20:07 | 2597253 0z
0z's picture

Fuck the Glass Steagall. Fuck it up the ass! My Freedom shall not depend on an Act! Free money, Zerohedge, Free fucking money, can you get that in you head? No regulation whatsoever, None! Just hard cold heavy fucking cash! Free Banking! Whats so hard to understand about the concept of liberty? Gold standard? Fuck the gold standard! Let people make their mind up. If they want to use worms as money, they should be fucking able to do so! Im tired of this double-faced call to liberty/ call to regulations. Fuck you all! Suck my dick.

http://vaevictis.me/

Sun, 07/08/2012 - 20:28 | 2597313 0z
0z's picture

Ahahahahah! Cmon people gang up. Zerohedge is the new mainstream! Ahahah! :P

Sun, 07/08/2012 - 20:31 | 2597325 0z
0z's picture

"Whatever you can do or dream you can, begin it. Boldness has genius, power and magic in it!"

- Johann Wolfgang von Goethe

Sun, 07/08/2012 - 20:34 | 2597335 0z
0z's picture

Fuck you all!

Freedom!

Freedom!

Suck my big fat dick!

Freedom!

Sun, 07/08/2012 - 23:01 | 2597708 smlbizman
smlbizman's picture

you know , i have been on this ride for 55 yrs now. ive signed the fronts of many checks, i would like to think my life time resume demonstrates honesty loyalty integrity hard work , owning or running companies....ive been around a little bit...their is only one thing left that i am willing to have any faith in....and thats the hedge....if the hedge turns out to be anything less than as presented...what would be left to hold on to?....zero hedge opens a can of ideas on topics that run thru the chat boards...were most knowledged is obtained....if your not smart enough to understand alot of articles, just keep reading as it comes up..this site is a college course with no end, it will continue to have life forever...with this being said ..... i will spend my very last trust card on the "tylers" ... if zero hedge is not legit than their is only a few things that are left to beilieve in.... some stuff and yourself.  .....

Mon, 07/09/2012 - 01:32 | 2597941 Michael
Michael's picture

What if I just like predicting, reading about, commenting on, and contributing to the best economic calamity porn site on the internets?

Mon, 07/09/2012 - 04:53 | 2598071 Reptil
Reptil's picture

yeah, that Smith guy is doing what all pundits of a failing system do: When they can't refute the message (with valid counter arguments) they attack the messenger (ZH).

So obvious....

Sun, 07/08/2012 - 19:14 | 2597137 veyron
veyron's picture

If that were the case, I'd expect to see a plethora of ads.  But there are no ads on his page ...

Sun, 07/08/2012 - 19:33 | 2597169 AlaricBalth
AlaricBalth's picture

Who in the hell is Noah Smith? I've been in "the biz" for quite a long time and have never heard of him.

Sun, 07/08/2012 - 16:58 | 2596771 ebworthen
ebworthen's picture

Noah Smith is exactly the kind of pompous ass who needs a good punch in the face and kick in the nuts.

Hey Noah, I haven't lost a penny asshole (other than what the FED and government have stolen).

I'd rather be a moral and ethical person than a worthless financial terrorist fit for hanging.

Thank you very much.

Got rope?

Sun, 07/08/2012 - 17:05 | 2596783 Aziz
Aziz's picture

Dude, advocating violence against someone for expressing their opinion is a very bad idea and will make ZH look like a mob of crazy people. Noah Smith is not the problem, he just wrote a bad article, and usually I mostly find him to be an entertaining writer. Banks and regulators and policymakers deserve your anger, not Noah Smith. 

Sun, 07/08/2012 - 17:06 | 2596792 Conrad Murray
Conrad Murray's picture

Meh, he's a cock gobbler looking to rattle the cages in a desperate effort to bring eyes to his worthless meanderings. This is like the financial blogging version of battle rap.

Sun, 07/08/2012 - 17:10 | 2596801 Aziz
Aziz's picture

Well, if he was looking for attention he got it. I am fairly sure he wanted a ZH response, which I am all too happy to give. But let's not be cruel.

Sun, 07/08/2012 - 17:18 | 2596828 Cheesy Bastard
Cheesy Bastard's picture

Noah Smith thinks that safe sex is with animals that don't kick.

Sun, 07/08/2012 - 17:54 | 2596917 ratso
ratso's picture

Noah Smith bases  his debunking of ZH on the proposition that the market is "close to being" efficient.  Huh? He is a self-pronounced fool by his own words. He has elected to expound on things that he doesn't know very much about.  One  is ZH and another is market efficiency.

Sun, 07/08/2012 - 18:46 | 2597061 Oracle of Kypseli
Oracle of Kypseli's picture

If you attack hard, prepare for a counter. Hence the gloves of ZH and its readers are off.

Mr. Smith try to elevate your standing by the quality of your own writings and advice rather than criticize what others write.

Sun, 07/08/2012 - 19:35 | 2597180 Rahm
Rahm's picture

Noah Smith.   No, that's the joke.

Sun, 07/08/2012 - 22:13 | 2597599 TheFourthStooge-ing
TheFourthStooge-ing's picture

Aziz said:

I am fairly sure he wanted a ZH response, which I am all too happy to give. But let's not be cruel.

Noah Smith's dad should have pulled out.

Mon, 07/09/2012 - 03:21 | 2598033 catch edge ghost
catch edge ghost's picture

Grunts are so easy to troll. You can't tame it. The frustration. The mob.

You stepped up. Association happens. I hope it doesn't dissuade you.

“Live never to be ashamed if anything you do or say is published around the world -- even if what is published is not true.” -messiah's handbook

Sun, 07/08/2012 - 17:10 | 2596806 TrainWreck1
TrainWreck1's picture

No doubt he will add "And I attacked ZH!" to his c.v.

Sun, 07/08/2012 - 19:15 | 2597141 veyron
veyron's picture

There's a spot in CNBC for him now ...

Sun, 07/08/2012 - 17:13 | 2596816 Rainman
Rainman's picture

you are right....how bout we just hope he gets a bad dose of the herps ?

Sun, 07/08/2012 - 17:38 | 2596885 Hulk
Hulk's picture

We're not a mob of crazy people ??? Shit, I did not know that !!!

More specifically, I have been told for many years that I am crazy for purchasing gold, that you can't fight the fed. BULLSHIT, Hulk says, and then Hulk thinks, PUNY HUMANS !!!

 

Weeeeee, this investing stuff is easy !!!

(made that up myself)

Sun, 07/08/2012 - 17:48 | 2596923 Conrad Murray
Conrad Murray's picture

Oh shit, somebody done woke Hulk up and this nigga looks ready to SMAAAASSSSHHHH!!!!

Sun, 07/08/2012 - 17:54 | 2596940 Hulk
Hulk's picture

I'm green dude...

Sun, 07/08/2012 - 18:12 | 2596990 fuu
fuu's picture

Super green.

Sun, 07/08/2012 - 18:13 | 2596997 LowProfile
LowProfile's picture

...Grigger?

Sun, 07/08/2012 - 19:37 | 2597183 Rahm
Rahm's picture

Green shoots?

Sun, 07/08/2012 - 18:16 | 2597000 slewie the pi-rat
slewie the pi-rat's picture

i'm black, BiCheZ

aziz is importing trollery?

dooty free! 

i gotta go see what angela has arranged for herself...

see ya!

Sun, 07/08/2012 - 20:50 | 2597381 Chariots of the Feds
Chariots of the Feds's picture

That's cause you ate your peas!

Sun, 07/08/2012 - 18:27 | 2597023 delacroix
delacroix's picture

what happened to the mogambo guru?

Sun, 07/08/2012 - 19:44 | 2597201 Hulk
Hulk's picture

No idea. Hopefully relaxing on the beach somewhere...

Sun, 07/08/2012 - 20:46 | 2597367 granolageek
granolageek's picture

ZH is a mob of crazy people. Would you like me to give the names of six totally serious guys with all the credibility of Million Dollar Bonus?

And Tyler has been predicting hyperinflation a week from Tuesday since 2009.

For all the loathing of strawman fake Keynesianism here, it was Keynes that pointed out that the market can stay irrational longer than you can stay solvent.

Mon, 07/09/2012 - 02:32 | 2597995 ebworthen
ebworthen's picture

Please repost post collapse; and when you aquire a moral compass.

Mon, 07/09/2012 - 02:43 | 2598001 ebworthen
ebworthen's picture

Aziz,

Thanks for the article; I enjoy your writing.

I wonder what will change the utterly corrupt status quo besides violence (?)

It is preferable for adults to apply morality, ethics, and the rule of law to arrive at equitable markets and society; however, my observation is that we passed that tipping point decades ago and have arrived at the point where the malfeasant and delusional use equivocation and sophistry to delay the justice that they and society so desperately need NOW.

Thu, 07/12/2012 - 16:55 | 2611093 e-recep
e-recep's picture

Damn yes we want banksters and their shills to meet the guillotine. Fuck their opinions. They talked enough already.

Sun, 07/08/2012 - 16:59 | 2596772 Ray1968
Ray1968's picture

Because Marketwatch is sooooo much better.........

 

Yeah right. TD Rocks. Fuck you Noah.

Sun, 07/08/2012 - 16:59 | 2596773 Racer
Racer's picture

ZH you know you are successful when they are attacking you! LOL

Sun, 07/08/2012 - 17:11 | 2596799 francis_sawyer
francis_sawyer's picture

The 15 minutes of fame from this stupid fuck will be counted in milliseconds...

Sun, 07/08/2012 - 17:45 | 2596907 r00t61
r00t61's picture

I never heard of this guy before Aziz wrote this piece. Gladly I'll forget his name after I go for a nice long bike ride.

I'll be much more interested when someone like Paul Krugman or Brad DeLong attacks Zero Hedge and Tyler, in print, for advocating such dangerous, partisan, insane ideas like sound money, fiscal prudence, and the end of the welfare/warfare crony fascist state.  That will mark the point when ZH has acquired critical mass.

Sun, 07/08/2012 - 18:03 | 2596969 vato poco
vato poco's picture

First they ignore you. Then, when they can't do that anymore, they mock you. Then they attack you; then they try to shout you down; then, in desperation, they go back to ignoring you.

Then you Win. The Bullshit Kings are dead, Long Live ZH.

Sun, 07/08/2012 - 18:45 | 2597065 Shigure
Shigure's picture

Beat me to it, my thoughts exactly

Sun, 07/08/2012 - 22:41 | 2597672 geekgrrl
geekgrrl's picture

Me too, and like you, I was beaten to the punch. Apart from all the accusations aimed towards ZH and its readers, it is a clear sign of fear on the part of TPTB.

I hate saying this, but I hope that the Tylers have bulletproof vests, because they are going to need them.

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