- The Big Picture - http://www.ritholtz.com/blog -
Weather Map Theory Of Global Investing
Posted By Barry Ritholtz On May 11, 2005 @ 11:00 am In Investing,Markets,Psychology | Comments Disabled
All investors create a intellectual construct of how and why the markets do what they do. (They may not be aware of it, but they do). Mine is loosely based on Chaos Theory, which combines elements of random, non-linear dynamic behavior with Trend. That’s why sentiment and market internals are so important to my construct.
I also like the weather map metaphor because it reminds me of two important facts. First, extraordinary investments, like weather systems, are transitory phenomena. Even the best investments don’t generate excepitonal returns forever.
Second, investing, like meteorology and thermodynamics, is not an exact science. It can help you to identify the storm systems that are going to make things happen. And it can tell you what things will look like when the storm has passed and thermal equilibrium has been once again restored. But it tells you very little about what happens in between.
His blog  is worth checking out.
WEATHER MAP THEORY OF GLOBAL INVESTING
Article printed from The Big Picture: http://www.ritholtz.com/blog
URL to article: http://www.ritholtz.com/blog/2005/05/weather-map-theory-of-global-investing/
URLs in this post:
 Rutledge: http://www.rutledgeblog.com/
 Weather Map: http://rutledgecapital.com/storm_watch.html
 Thermodynamics: http://rutledgecapital.com/how_we_think.html#thermoeconomics
 Image: http://bigpicture.typepad.com/.shared/image.html?/photos/uncategorized/weather_map.jpg
Copyright © 2008 The Big Picture. All rights reserved.