Monday, May 2, 2011

The DARK ART of Election Forecasting

A week before the election, I made the following wild and crazy forecast:
1. The Liberals will get trounced.
2. The NDP will make huge gains.
3. The Conservatives will get their majority.
4. The PQ will shrink.
5. Mr. Ignatieff will resign as Liberal leader; the Liberals will elect Bob Rae as their new leader.
6. Mr. Rae will negotiate a merger of the NDP and Liberals – let’s call the new party the Liberal Democrats.
7. The Liberal Democrats will be the opposition, when the recession/depression sets in, in 2012. The PCs will be blamed for the nation’s economic problems and when the next election comes in 2016, the New Liberal Democrats will form the government with the biggest lop-sided victory since Chr├ętien smoked Kim Campbell.
8. Scenario B is where the PCs get a minority again – under this scenario, the Liberal Democrats, along with the remains of the PQ, will defeat the
government and form the dreaded coalition. The coalition will form the government and lead Canada into the 2012 recession/depression. When the coalition breaks up and the election comes, Mr. Harper will win the most lop sided election since John Diefenbaker’s 1960s victory.

As you can see, in my view it is irrelevant who wins this election: a recession or depression is coming. Canadian politics can’t trump world economics.

And, as you can see, my naivety in politics has lead me to predict the formation of a new left-leaning party in the same way that a new right-leaning party was formed in the 1990s. Liberal and NDP supporters may urge me to stick to what I know best: the investment world. And keep my crazy political views to myself. And I would do that, were it not for one important concept: bullmanship.

In my investment book, Beyond the Bull, I talk about the different kind of lies found in the investment industry. My venture into political commentary sets me up for the creation of “the advertising lie.” In the investment world, we all present ourselves as qualified to help people make investment decisions – and we advertise that premise. Having made a starry eyed prediction about a Canadian political mega-merger, I can now wait… if my long-shot prediction does not come true, I will simply never mention it again. But if it does come true, I can quote myself time and time again as a political visionary who saw into the future. I will set myself up as a wise and insightful commentator who can truly see what lies ahead in Canadian politics. But I’m really a long-shot observer with a big imagination.

This is how the stock market’s advertising lie works.

Here’s what I mean. In Atlanta, USA, there are many people who have inherited shares of Coca Cola from the original inventor of Coke. Or from those local investors who bought into Coke 100 years ago and are still holding today. And today they are millionaires today because of their forefathers’ original wisdom in buying Coke shares when it was a small time local enterprise. This story is used time and time again by the investment industry to illustrate the wisdom of buying great companies and holding them for the long term.

It’s a true story: why am I referring to is as a lie? Easy: because the securities salesmen could have told the same story about General Motors a few years ago. Those who owned GM when it first became a company would also be millionaires today, except for one tiny detail: GM went bankrupt in 2010 and all the shareholders wound up with nothing. The reason the stock brokers tell the bullish Coke story is to persuade you to buy what they are selling. And the GM story does not support that goal. If you were a real estate agent trying to persuade an investor to sell his stocks and buy a commercial property, you might tell the GM story – or the Nortel story – or any other “they went broke” story. The stories are all bullmanship, designed to persuade you to buy whatever they are selling.

Now that I have boldly predicted the merger of the Liberals and the NDP under Bob Rae’s leadership, I just have to wait. If it does not come true, I will simple never talk about it again. If a merger does materialize, I will quote myself extensively and sell my services as a political visionary. I can’t lose.

To order your copy of Beyond the Bull and the Five Levels of Investor Consciousness CD, or to sign up for Ken’s free monthly webinar, visit (Bullmanship Code = SS32).

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