Toll-Free: 800.687.6551

News & Blog

Mario Mendoza and Financial “Experts”

By Jon Aldrich

Mario Mendoza

By all accounts, Mario Mendoza was a slick infielder who couldn’t hit a lick. His lifetime batting average was .215, which you don’t have to be a baseball aficionado to understand is not very good. He essentially recorded a successful base hit approximately 20% of the time, give or take. Heck, I think even the local weatherman is at about 40% or so and we all complain about that low success rate.

Back in the late 1970’s and early 80’s I can remember as a kid looking forward to the Sunday paper sports section where they would list all the baseball players from each league and their respective batting average and other key batting statistics, sorted in order of batting average, high to low in very fine print. Since I was a baseball statistics junkie, I made sure I pored through this every week to see how all my favorite Cubs players compared to the rest of the league. Remember, this was before we could just go online and get all this information at any time on the internet. At the top of the list were the usual suspects, Rod Carew, George Brett, Keith Hernandez (well before his Seinfeld days), etc. but at the bottom of the list almost every week it always seemed like you would see the name Mario Mendoza as he struggled to keep his batting average above .200. Needless to say, when we were playing whiffle ball or baseball in the sandlot, not a lot of us were pretending to be Mario Mendoza.

Mendoza’s name as the last name on the list became such a regular occurrence that the term “Mendoza Line” was coined at the time:

The most common origin of the story gives the credit to George Brett: In the midst of a slump early in the 1980 season, the Royals great told a group of reporters that, “the first thing I look for in the Sunday papers is who is below the Mendoza line.” He later used the term in a conversation with ESPN’s Chris Berman, and from there, it took off.

But according to Mendoza himself, it wasn’t Brett who coined the phrase. It was actually born in Seattle a year earlier, during Mendoza’s first season with the Mariners: With the shortstop well on his way to a fourth sub-.200 season, his teammates started (good-naturedly) getting on him.

“Tom Paciorek and Bruce Bochte used it to make fun of me,” Mendoza explained to the St. Louis Post-Dispatch back in 2011. “Then they were giving George Brett a hard time because he had a slow start that year, so they told him, ‘Hey, man, you’re going to sink down below the Mendoza Line if you’re not careful.’ And then Brett mentioned it to Chris Berman from ESPN, and eventually it spread and became a part of the game.”

Source: https://www.mlb.com/cut4/how-did-the-mendoza-line-become-an-mlb-term/c-277392972

Ok, so what does Mario Mendoza’s anemic batting average have to do with some of the financial “experts” you read online or see on TV?  Well, I was browsing my usual daily diet of financial and markets related articles a couple of days ago and came across this article: “Gartman, Yusko Sound Recession Alarm for 2019”. In the article,  Dennis Gartman, (who writes the Gartman Letter, which is a subscription research letter about the global capital markets), and Mark Yusko (the founder of Morgan Creek Capital Management, an investment firm that runs some hedge fund strategies) boldly trumpet that the economy has either a 50% to 100% chance of going into a recession in 2019, and a bunch of doom and gloom is in store soon as well.

The problem is, these gentlemen pretty much make these same type of sensationalist predictions every few months. Just do a Google search for Dennis Gartman and you will see what I mean. In fact, there is a whole subset of investors that use a Gartman proclamation as a signal to do just the opposite of what he says. I have nothing against Dennis Gartman, in fact, I have seen him speak at a number of conferences over the years and he is fascinating to listen to and I enjoy hearing the rationale for his decisions. He assembles a very compelling case and certainly does his research. You can’t knock him there. But his batting average on these predictions almost makes Mendoza look like a prolific hitter.

You can do the same for Yusko, as he seems to call for a recession or some kind of shock every year as well (See his 10 bold predictions for 2016). He said bad things were coming in 2017 as well, so might as well try again in 2018. You know persistence pays off. He is also a very intelligent person and presents a very persuasive argument.

Gartman Predictions

Source:  “Google search of Gartman market predictions”

The whole point is to take with a grain of salt when you hear some of these financial “experts” make bold and dire market predictions. Their plan is almost certainly not like your long term plan, and most of these guys (and gals) are just out to make headlines, because if they are right on a big call just once, they are set for a lifetime (See Elaine Garzarelli). We will eventually have a recession and bear market, those things are inevitable for the economy and the markets. It’s not the end of the world, though. (Although, I would imagine the end of the world would probably bring on a pretty severe recession). Will it happen in 2019 or 2027, or 2051? No one really knows, although “experts” like Gartman and Yusko will try to make you believe they know all the answers, history shows that is far from reality.  And the financial media loves to continue trotting these Nostradamus’ out there because it brings ratings. FEAR SELLS!.

Remember, a stopped clock is right twice a day, and even Mario Mendoza got about 2 hits for every 10 times he batted!  Yet another reason to not get so worked up when the media keeps trotting out the talking heads with their bold predictions that have some people running for the hills and stocking food and ammo in their bomb shelters.