The lesson of “the dress”

I honestly can’t believe I’m taking the time to write about this stupid dress. However, I think there is actually a “moral to the story” worth noting. While the internet, radio, and even TV is ablaze with morons arguing over whether the dress is white/gold or blue/black, those of us with at least half a brain and a minimum of a second grade understanding of digital camera operation simply ran the image through photo editing software to get a definitive answer that is affected neither by our screen’s display quality, nor the potential limitation/bias of our bodies. But before the spoiler, the lesson…

The case of the dress perfectly highlights the foolishness and power of prepackaged opinion sets, and how they can be used to control even a fierce, national level of debate. The dress debate only has two sides: white/gold and blue/black. Everyone that has weighed in on the argument has been presented with the same two sides up front, chosen a side, and commenced defending it to the death – quoting fake stories about the “actual” dress, citing fake science, and making up their own totally fabricated, meaningless analysis. This same type of behavior can be seen in debate of politics, foreign relations, economics, and nearly any matter affecting national policy decisions in what amounts to a carefully controlled “democracy.” This is something Noam Chomsky has spoken on many times.

“The smart way to keep people passive and obedient is to strictly limit the spectrum of acceptable opinion, but allow very lively debate within that spectrum – even encourage the more critical and dissident views. That gives people the sense that there’s free thinking going on, while all the time the presuppositions of the system are being reinforced by the limits put on the range of the debate.”

 

So we had the usual kind of debate going on, which illustrates a very important and pervasive distinction between several types of propaganda systems. To take the ideal types, exaggerating a little: totalitarian states’ propaganda is that you better accept it, or else. And “or else” can be of various consequences, depending on the nature of the state. People can actually believe whatever they want as long as they obey. Democratic societies use a different method: they don’t articulate the party line. That’s a mistake. What they do is presuppose it, then encourage vigorous debate within the framework of the party line. This serves two purposes. For one thing it gives the impression of a free and open society because, after all, we have lively debate. It also instills a propaganda line that becomes something you presuppose, like the air you breathe.

-Noam Chomsky

Most recently, we saw this in the national dialog over police brutality: you are either 101% in support of all police action (brutal or otherwise) or you’re an ungrateful, anti-police terrorist that is inciting the killings of police. People with the ability to see the world in shades of gray know this isn’t the case, but it is how the debate is/was framed in our society.

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As good old Gee-Dub Bush said, you’re either with us or you’re with the terrorists. There’s no room for people questioning an illegal US war on a country with zero connection to 9/11. If you do, you obviously loved 9/11 and you want the terrorists to win – those are the only two choices. Likewise with the Ukraine conflict, you either accept that Russia is the aggressor and everything is playing out as described in the NATO narrative or you’re a crazy conspiracy theorist that believes in the Illuminati (though in this case that tide is quickly turning under massive amounts new evidence coming to light). Even that useless skin bag of hot air Giuliani is playing the prepackaged opinion set game as he claims that Obama doesn’t love America because Obama doesn’t unapologetically support and worship each and every one of American’s (often illegal, immoral, or just plain stupid) actions both past and present. There is no middle ground in a black/white world. You either subscribe to opinion set A or B.

The fact that this national dialog/debate control tactic usually involves complex issues that the majority of people are incapable of truly wrapping their minds around sometimes make it difficult to show people the functioning of the prefab opinion set system. However, this totally irrelevant dress debate makes it quite easy to demonstrate. Why? Because just like in the more complicated debates over actually relevant issues, reality doesn’t match either opinion set. The dress is actually light blue and gold/brown.

Case in point

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It’s the prevailing wisdom in the US (at least amongst the uninformed) that less government intervention is the solution to all problems. Just move that big, bad government out of the way and the benevolent corporations will take care of us as if we were their own precious children. Anyone that owns a history book or was even just not asleep for the past decade, knows this belief is utter foolishness. But how does one go about exposing the foolishness to the masses when those masses are so history averse that they will deny and/or forget anything that happened more than fifteen minutes ago? Every once in a while, there’s a god-send of a current event that perfectly demonstrates the fallacy of the “free market curses all” belief for anyone that chooses to open their eyes to it.

This time, that event came in the form of two major snow storms and the state’s response to each. Both storms hit early in the work week. Both storms brought 12-24″ inches of snow across the state of CT. Both brought high winds. Both created a mess. The one difference between them? During the first storm, Governor Malloy decided to be proactive and issued a travel ban from 9pm on the night of the storm through 2pm the following day. During the second storm, no travel ban was issued. This meant that during the first storm, the vast majority of businesses across the state were forced to close during the worst of the storm because demanding that employees violate the law and endanger themselves at the same time just doesn’t sit well from a liability standpoint. Now, surely the believers in the evils of government and the beauty of the free market will tell us that employers would never put profits over employee safety – and so they did. All over news website comment sections and social media, the state exploded with vile, anti-government hate for the Governor that dared to assume that businesses wouldn’t have closed down on their own. No one seemed to pay attention to the fact that there was a record low of only 15 accidents across the entire state (none of which were fatal) and due to the lack of cars out and about, plows had the highways cleared almost immediately at the end of the storm. Alas, those facts didn’t matter. How dare the governor interfere! Free market! Apparently the governor heard their cries. During the next storm, he didn’t interfere. Subsequently, to the surprise of absolutely no informed person, very few businesses chose to close. Why? Because most businesses treat employees as commodities, not people. When given the option, employee safety always takes a distant backseat to profits (probably why OSHA and worker’s comp weren’t corporate creations). This time, the state’s roads were packed full of traffic during the worst of the storm. Results? Hundreds of car accidents statewide including a double fatality on I-95.

It’s certainly a minor example (though not for anyone that spun into a ditch trying to get to work or the two people who lost their lives), but it’s crystal clear evidence nonetheless. Sometimes, often times, businesses left to their own devices don’t get it right and it’s necessary for government to step up and do what it was designed to: give common folk a voice and meaningful leverage against those in power that do not care about their welfare.

Hindsight isn’t always 20/20

If there’s one thing CNBC and the Wall St. pundit, self-proclaimed “analyst” crowd is good at (and, trust me, there is only one thing) it’s retroactively applying fundamentals to explain current price movement. I mentioned this in my last post about oil as it related to their constant talk of oil supply shortages and the world’s impending dry up of oil supply/out of control oil demand back in July 2014 when WTI was over $100/barrel – then suddenly just a few months later WTI had dropped in value by 50% and the pundits were attributing it to a “supply glut” and no oil demand. They flip and flop like this when “analyzing” large price movements of any commodity or equity, desperately cherry picking fundamentals after the fact in an attempt to find a “logical” explanation for major movement that really can only be explained by trading action. The idea is to maintain the belief amongst retail traders/investors that price movement is always dictated by fundamentals, never simply by smart money slaughtering dumb money (which is actually what dictates short-term price movements). This false application of fundamentals keeps the efficient market theory alive – the idea that the current price is always the “correct” price from a fundamentals perspective. While this practice of flinging random fundamentals at a price move and seeing what sticks is used everywhere, it’s more visibly absurd with oil because of how volatile the price of oil typically is. It takes quite a bit of skill (or stupidity) to be able to flip-flop on fundamentals analysis fast and hard enough to keep up with oil price fluctuations, which brings me to my point…

On my ride in to work this morning, the gas station I typically buy my gas at had 87 octane posted at $2.03/gal (sucks to live in CT, I know). On my way home, it was $2.22. Every gas station on the ride home was up fifteen to twenty cents. What happened in eight hours to justify that? Let’s take a look at the price of US crude (WTI):

WTI

Ignore today just for a second. In the three trading days from last Thursday (the 1/29) to yesterday (2/3) the price of oil rocketed up almost 25%. Why? CNBC and market pundits everywhere can’t stop talking about the oil glut. We’re just swimming in oil that no one wants and that’s why oil prices have drilled themselves into the ground (zing!) – so says the pundits. Hell, we just got another report showing yet another increase in oil inventories… but oil shoots to the moon in the course of only three days. Did the fundamentals change? Nope. Did the glut go away (pretending it existed in the first place)? Nope. Did demand increase? Nope. This increase was so absurdly large and out of the blue (ignoring technicals) that CNBC didn’t even bother trying to fabricate an explanation this time. They’re writing it off as “price volatility”, a funny explanation for a 25% swing, coming from the guys that want you to always believe the current price of anything is the “correct” price. In fact, I already explained these kinds of price swings in my last post. The retroactively applied fundamentals used to explain the huge plunge in oil prices are a farce. Yes, as I’ve pointed out many times, the price fall is in large part due to Saudi Arabia’s actions, but the effect is a mental one more so than a fundamental one. As my last post showed, the extra supply from new US and Russian wells is not even remotely enough to explain the massive depth of the preceding four months’ price decline. The psychological effects of Saudi Arabia’s policy, however, were more than enough to fire up the speculation machine. It’s that rampant speculation and gambling that drove WTI down over 50% in four months and the same rampant speculation and pure trading pressure drove it back up 25% in three days (and, just as suddenly, back down 10% today). What’s been created is a herd of individual traders buying and selling not based on fundamentals, but on what they feel the rest of the herd will do. This is the basis of a market that has become almost completely disconnected from reality. Don’t buy into the falsely applied fundamentals, slapped on after the fact in an attempt to write a retroactive narrative long after the events have transpired. The vast majority of oil’s movement has been and continues to be purely trading pressure. Oil’s fundamental picture has not changed significantly in almost a year. The efficient market theory is bunk – the current price is not always “correct”. Once you realize that, the unanswered question remains what it has been all along: was oil over-priced in July 2014 or is it under-priced now? Based on an objective look at the fundamentals, it cannot be both. Figure out the answer to that question and you’ll know where oil is headed in the long-term.