Wall Street’s “Propaganda Machine” is feeding the media a steady diet of happy-talk. And the number one rule for ratings success is: “Know what the masses want and feed it to them.” Audience become sheep, cheer, want more. Today people are desperate for good news after the tragic lack of leadership the past few years. We got a dark reminder last week as two former Citigroup bosses (one a former US Treasury Secretary), admitted they “did not have a grip on what was happening” in their “too-big-to-fail” bank. Yet those bozos created a disaster and still pocketed hundreds of millions. And far more evil, their fat-cat successors are spending hundreds of millions of their shareholders’ money to defeat financial reforms that will prevent this from happening to them again.

Unfortunately this historical cycle’s doomed to reoccur. Except the next time it’ll end in another, bigger meltdown, and the “Great Depression 2” that the Fed and Treasury keep pushing downstream. So expect the “Propaganda Machine” to keep feeding sound-bites to the media, as this “Happy Conspiracy” between Wall Street, Washington and Corporate America keeps manipulating Main Street’s 95 million investors. It never ends. Here are three historical reminders:

“Propaganda Machine” in 2007-08 subprime meltdown

BusinessWeek, Kiplinger’s and USAToday reported on the false predictions made before the 2008 subprime credit meltdown spread rapidly across America and the world:

• Bernanke: “I don’t anticipate any serious [failures] among large internationally active banks.”
• Ken Fisher: “This year will end in the plus column … so keep buying.”
• Mad Money Cramer: “Bye-bye bear market, say hello to the bull.”
• Goldman’s Abby Joseph Cohen: “The fear priced into stocks is likely to abate as recession fears fade.”
• Barney Frank, “Freddie Mac and Fannie Mae are fundamentally sound.”
• Barron’s: “Home prices about to bottom.”
• Worth magazine: “Emerging markets are the global investors’ safe haven.”
• Kiplinger’s: “Stock investors should beat the rush to the banks.”
• Madoff: “It’s virtually impossible to violate the rules.”

Bad calls? Very bad. But Main Street’s a willing victim, we want to believe the happy talk.” We’re all trapped by this deadly disease, like sheep waiting to be slaughtered.

“Propaganda Machine” in 2000-2003 dot-com crash & recession

Back a few years ago we reviewed a 2003 book, Bull! 144 Statements from the Market’s Fallen Prophets, published during the 30-month recession, when Wall Street was losing $8 trillion in market cap. Here’s a few of America’s opinion leaders spreading their misleading happy-talk as the market slowly disintegrated for 30-months from 11,722 to 7286 in October 2002. Yet they prattled on. Unfortunately, many of these “Fallen Prophets” are still misleading investors as members of the new “Propaganda Machine.”

• James Glassman, author Dow 36,000. “What is dangerous is for Americans not to be in the market. We’re going to reach a point where stocks are correctly priced, and we think that’s 36,000 … It’s not a bubble. … The stock market is undervalued.” A month earlier Dan Kadlec published Dow 100,000. (Oct’1999)
• Larry Kudlow, CNBC host. “This correction will run its course until the middle of the year. Then things will pick up again, because not even Greenspan can stop the Internet economy.” (Feb’2000)
• Mad Money’s Jim Cramer: “SUNW probably has the best near-term outlook of any company I know.” (Sept’2000)
• Lehman’s Jeffrey Applegate. “The bulk of the correction is behind us, so now is the time to be offensive, not defensive.” (Dec’2000)
• Alan Greenspan. “The 3- to 5-year earnings projections of more than a thousand analysts … have generally held firm. Such expectations, should they persist, bode well for continued capital deepening and sustained growth.” (Dec’2000)
• Suze Orman. “The QQQ, they’re a buy. They may go down, but if you dollar-cost average, where you put money every single month into them … in the long run, it’s the way to play the Nasdaq.” (Jan’2001)
• Maria Bartiromo. “The individual out there is actually not throwing money at things that they do not understand, and is actually using the news and using the information out there to make smart decisions.” (Mar’2001)
• Goldman Sachs’ Abby Joseph Cohen. “The time to be nervous was a year ago. The S&P then was overvalued, it’s now undervalued.” (Apr’2001)
• Lou Dobbs, CNN. “Let me make it very clear. I’m a bull, on the market, on the economy. And let me repeat, I am a bull.” (Aug’2001)
• Larry Kudlow. “The shock therapy of a decisive war will elevate the stock market by a couple thousand points,” with Dow 35,000 by 2010. (June’2002)

All propaganda. No facts. All happy-talk designed to manipulate you and me. All part of an tacit conspiracy, the “Propaganda Machine.” In fact, the Dow bottomed only after a 30-month bear market, in October 2002 at 7286. The Iraq War started in April 2003.

“Propaganda Machine” in the 1929 stock crash & 1930’s “Great Depression”

The “Propaganda Machine” never stops, and thanks to the Supreme Court, it will make matters worse in coming years. Let’s go back to the crash of ’29 and the first “Great Depression.” Unfortunately it will take a replay of the 1929 disaster to trigger Wall Street reform. Dodd’s bill is too little, too late. So listen closely to all the happy-talking – past, present and future – and plan accordingly because 2012 is the “new 1929:”

• Irving Fisher, Yale Ph.D. in economics: “Stock prices have reached what looks like a permanently high plateau. I do not feel there will be soon if ever a 50 or 60 point break from present levels, such as (bears) have predicted. I expect to see the stock market a good deal higher within a few months.” (Oct. 17, 1929)
• Goodbody market-letter in New York Times: “We feel that fundamentally Wall Street is sound, and that for people who can afford to pay for them outright, good stocks are cheap at these prices.” (October 25, 1929)
• Business Week: “The Wall Street crash doesn’t mean that there will be any general or serious business depression … For six years American business has been diverting a substantial part of its attention, its energies and its resources on the speculative game… Now that irrelevant, alien and hazardous adventure is over. Business has come home again, back to its job, providentially unscathed, sound in wind and limb, financially stronger than ever before.” (November 2, 1929)
• Harvard Economic Society: “A serious depression seems improbable; [we expect] recovery of business next spring, with further improvement in the fall.” (November 10, 1929)
• Treasury Secretary Andrew W. Mellon: “I see nothing in the present situation that is either menacing or warrants pessimism … I have every confidence that there will be a revival of activity in the spring, and that during this coming year the country will make steady progress.” (December 31, 1929)
• Wall Street Journal: Re the top before the “real” stock market crash from Dow 298 to Dow 41:“Chase National Bank says the current conditions of very easy credit and poor business have always been a buying opportunity in the past. Absolutely confident that any list of good stocks will have good gains by end of 1931 and probably show a profit by end of 1930.” (June 1930)
• President Herbert Hoover: “The depression is over.” (June 1930)

Yes, the “Propaganda Machine” is relentless, is growing stronger. And thanks to the Supreme Court’s incredibly dumb decision that treats corporations as humans, Wall Street’s “Machine” will feed more and more propaganda through the media, lobbyists and campaign donations, to control Washington. “The Machine” has your profile, knows you’re easily manipulated by happy talk, bullsh*t and nonsense optimism. There’s little you can do: Capitalism and democracy are dead. And unlike 2008, we will not be able to dodge a replay of 1929 and a new “Great Depression 2” after the coming crash.

orig.pub: MarketWatch Apr’10

America really loved “the action” during the go-go days of nineties “new economy,” dotcoms, tech and ”information revolution.” And Wall Street got tons of free advertising while main-lining their message into the brains of the relatively naïve masses, thanks to their “co-conspirators” in the media. For example, cable channels like CNBC and CNN would easily get thirty or more high-paid Wall Street pundits and stock market gurus on-air every day—for free! Today, Wall Street and their advertisers are still rapidly increasing their control over media editorial policies, as publishers make more and more concessions to hold onto a declining base of advertisers.

“Nothing is what it seems:” That rule sure fits Hollywood. It also works for the illusionists of Wall Street. Every illusionist knows that your brain secretly loves being mislead, deceived and manipulated by their fantasies. Want proof? Let’s begin in Hollywood …

“The Illusionist” is a brilliant film about Eisenheim, a magician who fascinated Old Vienna a century ago. “Nothing is what it seems” warns the subtitle. And the clues are everywhere. But they’re not obvious … until later as your brain retraces the unfolding drama, with secrets hidden in Sophia’s beauty, in the ruthless Prince Leopold’s plot to overthrow his father, in the haunting music, old-world scenery, lush camera work, the childhood romance between the prince’s fiancé and the magician, her unsolved murder, the spectacular new show designed by a grieving illusionist to extract revenge, his oriental confederates, the ghosts calling back from the dead, then eventually the dead lover reveals a secret, enraging the prince who … ah, but that would give away it all away, for in this world you and I live in, “nothing really is as it seems” … or is it?

If you’ve read this story so far, then you’ve already proven my point: Your brain actually enjoys being deceived. We accept it in dark theaters. Bit it works as well in the everyday “theaters” of politics and investing and economics—where our brains also demand entertainment, amusement, pleasure! Why else would we accept Wall Street’s grand misleading delusions! Read on …

Why do our brains love to be deceived?

What is it about our brains that pull us inexorably into this shadow world, where we willing accept as “real” a contrived, parallel universe where nothing is what it seems? In a dark theater you accept that your brain has been programmed to trade reality for fantasy and illusion, even lies and deception. You know and accept that you will not only be mislead, your brain wants to be deceived. In fact, it feels cheated when you’re not deceived, when you figure out the film’s plot too quickly or too easily!

Oh, admit it, your brain really does love being misled, lied to and deceived! Why? Because your brain is programmed to deny reality when it doesn’t fit your belief system, and even moreso, because it delights in being tricked by fantasies. It started back when your parents read to you as a child. Call it ‘entertainment” if that helps rationalize your denial. But the truth is: Your brain inexplicably draws some dark secret pleasure from being deceived, mislead and manipulated.

Our brains enjoy being deceived by old familiar “stories”

Unfortunately, your brain functions the same way everyday in the so-called real world of politics, economics and investing. Hordes of illusionists wait for you to enter their “dark theaters”—advertisements, press releases, broker’s tips, breaking news, stock recommendations, etc. Whether you’re a bull or bear, they know your brain will automatically suspend it’s reasoning powers to indulge in a well-crafted “story” that fits neatly into your brain’s preprogrammed mindset of illusions.

The truth is, a bearish brain only “hears” bearish predictions, growls at bullish ones. Visa versa with bullish brains. Get it? Brains are wired one way or the other. The political “brain” is another example: You know it selectively seeks and hears only what it’s “pre-programmed” to hear: Lou Dobbs’ audience is just a bunch of liberal Democrats. And Bill O’Reilly’s audience are nothing but conservative Republicans. Neither has time for the other. Why?.

We screen out contrary facts and opinions in many ways. We only accept opinions that reinforce our preprogrammed illusions. Bull or bear, all investors are trapped in their brain’s cocoon of illusions and delusions, where economic predictions and market forecasts have far more power than any created by Hollywood’s best illusionists—where they’re far more elusive until it’s too late, the bubble bursts, and our money disappears into a magician’s pocket.

The illusory world of economic illusionists

Legendary management consultant Peter Drucker once said; “Anybody who tells you that he understands the American economy ought to be sent to teach modern dance.” And several years ago the headline of a BusinessWeek column by Robert Kuttner, author of Everything is for Sale, said it all: “What do you call an Economist with a Prediction? Wrong.” Yet they keep on predicting, and amazingly, we keep on listening!

Back at the peak of the dotcom mania, another expert researched the accuracy of leading forecasters over a few decades. William Sherden findings were summarized in The Fortune Sellers: The Big Business of Buying and Selling Predictions. When I asked Sherden if his conclusions still fit today, he said: “They are timeless. The political influence on predictions is basic human nature.　I see no way that economic forecasting can improve since it is trying to do the impossible.” Get it? Whether you’re a bull or bear, optimist or pessimist, predicting the future of the economy is impossible, a total misleading illusion. Listen to Sherden’s ten key findings in The Fortune Sellers:

1. The forecasting skill of economists is on average about as good as guessing. In fact, predictions by the politically driven Council of Economic Advisors, Federal Reserve Board, and Congressional Budget Office were often worse than guessing.
2. Economists cannot predict the turning points in the economy. Of forty-eight predictions made by economists, forty-six missed the turning points.
3. Economic forecasting accuracy declines with longer lead times.
4. No economic forecasters consistently lead the pact in accuracy.
5. No economic ideology consistently produces superior forecasts.
6. No economic forecaster has consistently higher forecasting skills predicting any particular economic statistic.
7. Consensus forecasts do not improve accuracy (although the press loves them)
8. Psychological bias affects forecasters and their forecasts. Some economists are naturally optimistic and bullish, others are consistently pessimistic bears.
9. Increased sophistication provides no improvement in forecasting accuracy. Remember the Long-Term Capital Management hedge fund? Two brilliant Nobel Economists backed by Wall Street’s elite nearly sabotaged the world economy.
10. Finally, Sherden says there’s no evidence that economic forecasting has improved in recent decades. In fact, forecasting is appears to be deteriorating as partisan politics, Wall Street gaming and unpredictable global events invent new illusions.

And so my dear investors: “Nothing is as it seems” remains rule number one when it comes to all economic predictions you rely on for your investment decisions. And the corollary? Rule number two: “All economic predictions will fail you.” Your best strategy, whether bull or bear, is to trust no one, and question all predictions, especially those your brain is convinced are “true.” The economists aren’t doing to stop because the media need to fill airspace and paper with copy, and their employers (mostly Wall Street banks, government and think-tanks with political agendas) pay them to spread their message, whatever it is.

Yes, “Big Brother” really is watching you—don’t listen

Just remember, you live in a world full of illusions created by illusionists who know more about you than you know yourself. They have you profiled in many databases. They know how to slant an ad to get you to do their bidding. They know your brain derives a secret pleasure from being deceived, lied to and manipulated—and they surely know that due to some mysterious design flaw, your brain gets a perverse thrill when you enter the everyday “theater of the absurd” in Hollywood, Washington and Wall Street. Yes, these thousands of illusionists know you are preprogrammed in such a way that you’re highly vulnerable to their illusions, untruths, deceptions and manipulations.

Wake up folks … nothing ever is what it seems. Whether you have a bear brain or a bull brain, in today’s wonderful world of illusions, you cannot time the market, and you cannot trust any economic predictions from Wall Street’s illusionist. But you can protect yourself—don’t listen and play their game by their rules.

FirstPubDate: Sept’06