In Defense of Zero Hedge (not that they care)

Two financial blogs got started at around the same time at the end of 2008 - beginning of 2009.  One was mine, the other was Zero Hedge.  From the moment I became aware of the other "newcomer" blog, two things struck me:

1.  The pace and depth of the posting was both awe-inspiring and nothing short of revolutionary

2.  Almost nothing on that site was going to be actionable for me, even as it became (and remains) a daily must-read

I am now and have always been a big fan of Zero Hedge.  But it's something I read, not something I live and swear by.  I'm 34 years old - been around the block a few times, know what I mean?  Understanding how to read ZH will keep you from the type of hysterical (and embarrassing) over-reactions we saw so many of yesterday in the wake of their MF Global - CME post (more on that in a second).

Before I launch into my defense of Zero Hedge, let me first show you what I mean by my point above about it not being actionable for me.  The following simple chart will demonstrate that we have not had a meltdown in US markets during the almost three years that ZH's community has been predicting/praying for that to happen (although they'll retort that it's coming any minute now):

So will "The Big Reset" back to Dow Zero and a sticks-and-stones economy ever finally arrive?  I don't know, but there's very little sense in betting on that outcome because which counterparty will actually be able to pay you off when you're right?  To me, the argument about whether Zero Hedge is right or wrong about the big picture is tedious, I'm much more interested in the site's parsing of the daily news flow and the prism through which they view it all.

What people don't get about Zero Hedge is that "the monoculture," as Paul Krugman called it, will consistently provide the reader with worst-case scenarios - indelibly crafted ones that force us to rethink our positions in the context of "What could go wrong?"  While Zero Hedge has had its fair share of dire predictions that have come true, it's also had plenty of conspiracy theories and innuendo that have amounted to nothing.  And that's okay, provided you're reading and enjoying the site correctly.

Is ZH completely biased toward the most negative outlooks and opinions possible in almost every single finance-related topic?  Yes it is.  But Tyler Durden & Co would never have been necessary in the first place had the regular "mainstream" media (I hate that term) been doing its job.

Zero Hedge provides a counter-balance to all the cheerleading, Jack Welch-worshiping, bank-captured bullshit that passes for modern "market coverage."  As hyperbolic and at times misleading as ZH is to the dark side of things, isn't it merely giving us the opposite of all the skewed and misleadingly positive garbage we've been digesting over the years prior?

And perhaps the greatest testament to what ZH has done for us all these past few years is the new-found relentless skepticism of the traditional press.  Nothing happens in this market or economy now without a thousand journalist/bloggers from CNBC Net Net to WSJ's Deal Journal to Reuters to DealBook picking it apart, turning it over for details and tearing into it for hidden secrets.  There are now Bloomberg charts everywhere you look and hundreds of speculative posts (Is the Fed Secretly Getting It's Orders from China?) being churned out each day, for better or worse.  In truth, everyone has adopted a little bit of Tyler Durden and I can't see that added bit of skepticism being such a bad thing.

Yesterday ZH published an over-the-top reaction to a CME Group email about margin requirements that ended up being incorrect.  The fact that it was also hyperbollically titled (CME Goes to Collateral Def Con 1) while being factually incorrect set off a bit of a flame war in the financial blogosphere.  Fortunately, another blogger named Kid Dynamite debunked the ZH post early and then the CME came out with their official correction due to their email having been misunderstood by many recipients.

Zero Hedge printed their own correction of themselves as soon as it became evident that they had read the release incorrectly.

But that's not the point in my view.

Only an imbecile mistakes the blogging at ZH or Business Insider or HuffPo as the same thing as news from a wire service or actual news source.  It's not that these blogs aren't capable of "reporting it straight" or even breaking news - they all can and have in the past.  It's really the fact that most of what they do is repeat news being made elsewhere in a more attention-grabbing way.  If you equate ZH with Dow Jones or HuffPo with the New York Times or Biz Insider with the Associated Press - then really, you're kind of an idiot.

If Zero Hedge didn't exist by now, we'd have to invent it.  Not everything printed there need be 100% factually accurate in order for the site to fulfill the role that it does each day.  And if by now you can't understand that role and the idiosyncrasies that come along with playing it, then I don't know what to tell you.

 

 

 

 

Full Disclosure: Nothing on this site should ever be considered to be advice, research or an invitation to buy or sell any securities, please see my Terms & Conditions page for a full disclaimer.

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