Investing is an entrepreneurial activity. Investors, like all entrepreneurs, trade in uncertainty. They anticipate the future with no guarantee what they anticipate will materialize. Because investing is entrepreneurial, no system -- regardless how rules based, mathematically rigorous, or regression tested -- can guarantee success.
Past is not prologue; tomorrow will never replicate today or yesterday. Therefore, it's impossible to perfectly divine tomorrow by analyzing the present and past alone. Far too many variables influence any market, and each variable will offer a differing influence at any point in time -- ceteris paribus is a chimera,
For these reasons I bristle when a person, usually of some notoriety, asserts with no hint of reservation, that we are in the denouement of a bubble, bear, or bull market. In short order we're headed to Hades or Heaven. Many prophets are bold, even arrogant, in their certitude. And why? Because their prognostications were fortuitous at the previous turn. They got it right within a persuasive amount of time, so they'll get it right again within a persuasive amount of time.
More likely they won't. The market gurus (a few are free-market types, with whom my sympathies lie) who correctly timed the housing-market collapse have ill-timed the stock and bond market collapses -- neither has yet to collapse. When the Federal Reserve embarked on quantitative easing in 2008, capital markets -- stocks and bonds in particular -- would quickly distend with new money and burst like corpses fermenting in tropic heat, they reasoned. This has yet to occur..
At this point, the reputations of many prophets have been sullied by the staying power of capital markets.(Wharton School Psychology Professor Philip Tetlock offers five common defenses you'll hear to explain away timing errors.) But one day, capital markets will turn, or even crash, and their "ah-ha" moment will arrive, and they will exploit that moment to resurrect and burnish tarnished reputations. This conjures a a quote from Fred Schwed Jr.'s delightful and scathing book on Wall Street Where Are the Customers' Yachts. Schwed writes, "Mr. Roger Babson had predicted the [1929] crash for several years, which shows, among other things, that he had been very wrong for several years before he suddenly became very right."
I'm unclear to the amount of time that must properly pass before weather morphs into climate. Similarly, I'm unclear to the amount of time that must properly pass before a prophet morphs into a broken-clock reader. I suspect that time is near, if it isn't here already.
Past is not prologue; tomorrow will never replicate today or yesterday. Therefore, it's impossible to perfectly divine tomorrow by analyzing the present and past alone. Far too many variables influence any market, and each variable will offer a differing influence at any point in time -- ceteris paribus is a chimera,
For these reasons I bristle when a person, usually of some notoriety, asserts with no hint of reservation, that we are in the denouement of a bubble, bear, or bull market. In short order we're headed to Hades or Heaven. Many prophets are bold, even arrogant, in their certitude. And why? Because their prognostications were fortuitous at the previous turn. They got it right within a persuasive amount of time, so they'll get it right again within a persuasive amount of time.
More likely they won't. The market gurus (a few are free-market types, with whom my sympathies lie) who correctly timed the housing-market collapse have ill-timed the stock and bond market collapses -- neither has yet to collapse. When the Federal Reserve embarked on quantitative easing in 2008, capital markets -- stocks and bonds in particular -- would quickly distend with new money and burst like corpses fermenting in tropic heat, they reasoned. This has yet to occur..
At this point, the reputations of many prophets have been sullied by the staying power of capital markets.(Wharton School Psychology Professor Philip Tetlock offers five common defenses you'll hear to explain away timing errors.) But one day, capital markets will turn, or even crash, and their "ah-ha" moment will arrive, and they will exploit that moment to resurrect and burnish tarnished reputations. This conjures a a quote from Fred Schwed Jr.'s delightful and scathing book on Wall Street Where Are the Customers' Yachts. Schwed writes, "Mr. Roger Babson had predicted the [1929] crash for several years, which shows, among other things, that he had been very wrong for several years before he suddenly became very right."
I'm unclear to the amount of time that must properly pass before weather morphs into climate. Similarly, I'm unclear to the amount of time that must properly pass before a prophet morphs into a broken-clock reader. I suspect that time is near, if it isn't here already.
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