Knowing The Unknowable; Reflections On The Fed Hike

In the past week, two readers, one of them a blogger, professed to “know” something that cannot possibly be known.

“Epocalypse” Now

The first person, an economic blogger, tells me a global economic collapse of biblical proportion is coming. He labels the collapse an “epocalypse” and offered a guest-post article that I passed on.

I responded “No one knows the precise timing of a collapse. There might not even be one.
Stocks could do a slow decline like Japan for years.”

You can start a countdown, because yesterday he pinged back “Check in with me at the end of the week.”

Crunch Time

Reader “BL” wrote … 

 Hello Mish,

It is crunch time. An escalation in interest rates will immediately bankrupt the United States because the country will be unable to service the eighteen plus trillion dollar debt.

The United States economy will collapse fifteen days after an increase in the interest rate. That is the real reason that Janet Yellen will do nothing forever. Do the math. What is the cost of a 1% increase in the national debt?

What are you afraid of? Speak the truth. Stocks are overvalued and will continue to be so until the crash. When will the crash occur? You know the answer. You have always known the answer. Tell the truth. The crash may occur before the next presidential election. What will that mean? You also know the answer to that question.

It is crunch time. Speak the truth or be buried by the truth. Your choice.

Sincerely
BL

Impossible to Know the Unknowable 

I responded to BL with the following challenge (slightly abbreviated from my original reply). 

 Anyone who claims they know precisely when stocks will collapse is either a fool or a charlatan. 

But since you “know” stocks will collapse 15 days after a hike, I suggest you put everything you have on it with PUTs. What could you possibly be afraid of?

It’s crunch time, do as you say or don’t tell me you know what will happen. Your choice.