The tin-foil hats of finance

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Whilst most of my financial information comes from online news sites (Bloomberg, etc), I do occasionally drift to the dark cynical side of financial speculation where i struggle to comprehend the amount of hardened far right winged bs on these sites. I have heard everything from the economy secretly being run by Muslims, to posts encouraging users to hoard physical gold in the wake of a fiat currency crisis. Whilst the arguments for the later are much more reasoned, it is still, imo at least, quite a controversial and therefore extreme view to hold. Even when reading more reputable news sites these people seem to reappear in the comments, questioning each article with great suspicion as if the journalist is an architect of the "New World Order", or even worse: a banker.

I recognise the extremity of these views run along a gradient. Whilst I'm sure few money managers are making financial decisions based on NWO theories, how many people in professional finance positions are invested in concepts like a fiat currency fallout? Or on Russian/China/US government conspiracies? Or on banking manipulation?

Whilst I wouldn't make investment decisions on any of the above, there is certainly evidence that all of the above do exist (think LIBOR, Chinese economic data, and the Euro currency crisis).

Do these people exist in a professional context, or are they trading under a tin-foil hat in a bunker somewhere? If so, how marginal are they? And perhaps most importantly, where is the line between genuine contrarian strategy and insanity?

Would you invest in black swans?

Comments (23)

 
Sep 23, 2013 - 1:06am

Anyone with any common sense can see that the world is changing and that the NWO is coming. The fiat currency crisis is real along with a plethora of other problems created by Wall Street.

IM sure plenty if not all know there is truth to it on Wall St. but whose going to jeopardize their career over nonsense??

alpha currency trader wanna-be
 
Sep 23, 2013 - 3:37am

A lot of people are heavily invested in a fiat currency collapse through gold and foreign asset holdings. There are certainly firms out there that provide products and services to individuals that hold a similar viewpoint. Many people will recognize Peter Schiff from his pre-2007 predictions. His firm, Euro Pacific Capital, has an investment thesis centered around the decline/collapse of the dollar and the US economy. You can find EPC's strategy and viewpoint here:

http://www.europac.net/our_investment_strategy
http://www.europac.net/about/where_we_stand

I am sure that there are others out there, but Schiff is relatively well-known. I would be interested to see if there are other firms that are invested in some of the crazier conspiracies.

 
Sep 23, 2013 - 5:33am

Expecting a fiat currency collapse isn't wacky at all - it happens all the time. Expecting a major world currency to collapse ($, €, £, ¥, etc.) is a much bigger stretch, though on a long enough time line (hat tip: ZeroHedge, lol) anything is possible.

The question becomes is it worth hedging against such eventualities, and for me the answer is no. I made some nice money on gold and silver in the last big run up, but it was never because I thought the dollar was going to collapse. As the Fed continues to pervert the dollar, you'll see a corresponding rise in the value of hard assets, but it's not a game you'll get rich playing.

 
Sep 23, 2013 - 10:55pm

Edmundo Braverman:
The question becomes is it worth hedging against such eventualities, and for me the answer is no.

The other question you have to ask yourself if you actually work in finance is whether you will have a job if a major fiat currency were to collapse. I'm betting I'd be unemployed if the world got bad enough USD actually collapsed. I don't think that's because I'm bad at my job, I just have trouble believing any US hedge funds would survive something like that due to the economic chaos that would likely follow.

 
Sep 23, 2013 - 11:52pm

Interesting link. The Euro Pacific Capital is quite a conservative example I suppose. They seem more hedged against an American decline rather than a full-blown collapse. I would imagine there strategy of being long foreign equities would not fair well in the event of anything too serious happening to America. As you said, I would be interested in hearing if something a little bit more paranoid exists.

@ Edmundo:

Sorry, I was unclear. I was more so referring to a major currency collapse or even the complete collapse of fiat currency as a whole, which as you stated, is much less likely. Although i don't trade money (just practice accounts for me), like yourself I have been quite active in gold on both the long and the short side as economic data and Fed announcements (yes announcements, not policy) have changed. At the risk of extrapolating my own experiences, I would imagine most of the trades in gold are just this, trades on confidence and Fed policy. I could be wrong, but I envision the more extreme doomsayers would be concentrated in physical gold.

Should I buy (physical?) gold as a hedge though? As Asatar said, black swans have attractive asymmetric payoffs. Is a currency fallout truly a black swan though? It would be impractical for us to define black swans as being the "unknown unknowns", it would defeat the purposes of the topic as we wouldn't be able to identify the event to discuss. If we relax this however to include "relatively unknown unknowns", this is far more useful. Even still,does a currency fallout even qualify as a "relatively unknown unknown"? As this thread has shown, it wouldn't even qualify as this. Whilst I won't attempt the math, based on the popularity of the notion alone, I would argue this would already be priced (overpriced?) into gold. I'm by no means an expert on the matter and would interested in opinions explaining otherwise.

 
Sep 24, 2013 - 8:26am

Edmundo Braverman:

A buddy of mine loaded up on a shit ton of physical gold and silver and now he's got...a shit ton of gold and silver. I think he bought into all the Obama's-coming-for-our-guns hype and figured we were headed for civil war. So far, not a great play.

If he had loaded up on RGR, SWHC, or their actual products when Obama got elected he would be sitting awful pretty

 
Sep 24, 2013 - 7:57am

If the dollar collapses I'll have a lot bigger things to worry about. Thins will be tough enough I don't know how useful the gold will even be.

 
Sep 24, 2013 - 10:44am

Unfortunately all the people wearing tin foil hats are turning out to be right these days with all the shit thats being undercovered about what the US govt and other govt have been up to these days

"And the last thing, how much do you charge for a career consultation and would you accept a check?"
 
Sep 24, 2013 - 10:45am

If your fund manager doesn't like the current president, whatever, but if they're pulling financial theories off of Glenn Beck, take your money and run.

Get busy living
 
Sep 24, 2013 - 11:50am

You cast a pretty wide net on "extreme right wing." I'm thankful I haven't come across the Muslim stuff but I don't spend a lot of time in the partisan fever swamps (I hear the left wing has one, too.)

 
Sep 24, 2013 - 12:22pm

The left definitely has its cesspool, and it's not what most right wingers envision. Funny part is, they agree on a lot of things the far right tinfoil hat crowd does, just for different reasons. I don't know if that makes the meeting point right or not on some issues, but it does kind of point to people hating the gov't progressively more as they move out towards either fringe.

Personally, when I want truly fringe ideas, I look to Hollywood.

Get busy living
 
Sep 24, 2013 - 12:33pm

Would you consider zerohedge to be tinfoil? I mean the analysis can be interesting but you get the feeling he is waiting for the world to crash and burn.

 
Sep 24, 2013 - 3:27pm

What do you guys think about Mark Spitznagel? Dealbook had an article about him today and his new book just came out. I'm about halfway through, it's out there but kind of thought provoking. http://dealbook.nytimes.com/2013/09/24/a-hedge-fund-manager-who-doesnt-mind-a-losing-bet/?smid=tw-share&_r=0

Lana? Lannaa???? LANA!!!!!!!!!?!?!?!

See my WSO Blog | See my WSO interview

 
Sep 24, 2013 - 3:30pm

What do you guys think about Mark Spitznagel? Dealbook had an article about him today and his new book just came out. I'm about halfway through, it's out there but kind of thought provoking. http://dealbook.nytimes.com/2013/09/24/a-hedge-fund-manager-who-doesnt-mind-a-losing-bet/?smid=tw-share&_r=0

Lana? Lannaa???? LANA!!!!!!!!!?!?!?!

See my WSO Blog | See my WSO interview

 
Sep 24, 2013 - 3:43pm

If you guys are worried about systemic risk (related)...Japan is far and away the number one threat, followed somewhat closely by China.

http://vlab.stern.nyu.edu/

Please don't quote Patrick Bateman.
 
Sep 24, 2013 - 7:47pm

Yeah, the left also has its fair share of wackballs. To a degree, a horseshoe shape applies to political alignment where the fringes often have more in common with each other than the people in the middle. Both paranoid, radical, etc.

Zerohedge is a bit tin-foil imo. The analysis is always based on pretty good fundamentals but i always feel they try to be too cynical. Obviously thats there whole agenda, but its always really exagerated.

The trouble with this type of analysis is, "great, country/bank is a fundamental nightmare, when the hell will it collapse though". Who can afford to be Kyle Bass? (Hint: I Dont think the answer is Kyle Bass)

 
Sep 25, 2013 - 3:24pm

ZeroHedge is the only "tin foil" site I've read. Many aspects of ZH are annoying: the constant goldbugging (buggery?), buzzfeed-style posts with titles like "20 reasons economic collapse is coming", and a troubling comment section. But if you ignore the noise, their charts and analysis are usually solid in my opinion. And they bring attention to topics like HFT and domestic spying months or years ahead of the news media.

"Who do you think you are? I am!" -Pete Weber
 
Sep 27, 2013 - 8:26am

Roman_Abramovich:

ZeroHedge is the only "tin foil" site I've read. Many aspects of ZH are annoying: the constant goldbugging (buggery?), buzzfeed-style posts with titles like "20 reasons economic collapse is coming", and a troubling comment section. But if you ignore the noise, their charts and analysis are usually solid in my opinion. And they bring attention to topics like HFT and domestic spying months or years ahead of the news media.


Ditto this... and the people who comment are great entertainment. they strike me as the type of people you would find on 'Doomsday Preppers'. If nothing else i read it most often to get the other side of an argument if that makes any sense.
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