Comments on: The Myth of the Rational Market http://www.ritholtz.com/blog/2009/06/the-myth-of-the-rational-market/ Macro Perspective on the Capital Markets, Economy, Geopolitics, Technology, and Digital Media Sat, 21 Nov 2009 22:10:06 -0500 http://wordpress.org/?v=2.8.5 hourly 1 By: Anonymous Jones http://www.ritholtz.com/blog/2009/06/the-myth-of-the-rational-market/comment-page-1/#comment-180357 Anonymous Jones Sun, 07 Jun 2009 22:02:37 +0000 http://www.ritholtz.com/blog/?p=28410#comment-180357 The market is neither efficient nor rational. The EMH came about because someone mistook efficiency for the fact that markets are not *predictably* inefficient or irrational. How this is news astounds me... Keynes said it long ago. "The market can stay irrational longer than you can stay solvent." The people who beat the market consistently are not necessarily those who can identify the bubbles or other irrationality. The people who beat the market consistently are those who happen to make the right bets at the right time on when the bubbles or other irrationality will end (or begin). The market is neither efficient nor rational.

The EMH came about because someone mistook efficiency for the fact that markets are not *predictably* inefficient or irrational.

How this is news astounds me…

Keynes said it long ago. “The market can stay irrational longer than you can stay solvent.”

The people who beat the market consistently are not necessarily those who can identify the bubbles or other irrationality. The people who beat the market consistently are those who happen to make the right bets at the right time on when the bubbles or other irrationality will end (or begin).

]]> By: farmera1 http://www.ritholtz.com/blog/2009/06/the-myth-of-the-rational-market/comment-page-1/#comment-180200 farmera1 Sun, 07 Jun 2009 12:31:38 +0000 http://www.ritholtz.com/blog/?p=28410#comment-180200 "...any kind of twisted logic to get their way because they only care about #1. They will destroy their country and the environment to enhance their wealth." Starve the Beast, I always wondered what that meant. I think we are now finding out. Can we officially say the Beast is Starved??? Maybe not yet, but we are getting closer day by day. “…any kind of twisted logic to get their way because they only care about #1. They will destroy their country and the environment to enhance their wealth.”

Starve the Beast, I always wondered what that meant. I think we are now finding out.

Can we officially say the Beast is Starved???

Maybe not yet, but we are getting closer day by day.

]]> By: danm http://www.ritholtz.com/blog/2009/06/the-myth-of-the-rational-market/comment-page-1/#comment-180199 danm Sun, 07 Jun 2009 12:02:58 +0000 http://www.ritholtz.com/blog/?p=28410#comment-180199 Transor Z Says: So when I heard the deregulation crowd appealing to “sanctity of contract” as a basis for justifying the bonus nonsense at AIG and the banks I felt more than a twinge of irony and just shook my head. ------------------- You hit the nail right on the head! These 100% free market types do not care about anything esle but themselves. They will use any kind of twisted logic to get their way because they only care about #1. They will destroy their country and the environment to enhance their wealth. That is exactly why 1 or 2 million$ is not enough and they need hundreds of millions... They know darn well that one day their destructive ways might catch up with them and force them to exile to a private island. Transor Z Says:
So when I heard the deregulation crowd appealing to “sanctity of contract” as a basis for justifying the bonus nonsense at AIG and the banks I felt more than a twinge of irony and just shook my head.
——————-

You hit the nail right on the head!

These 100% free market types do not care about anything esle but themselves. They will use any kind of twisted logic to get their way because they only care about #1. They will destroy their country and the environment to enhance their wealth. That is exactly why 1 or 2 million$ is not enough and they need hundreds of millions… They know darn well that one day their destructive ways might catch up with them and force them to exile to a private island.

]]> By: primordial_ooze http://www.ritholtz.com/blog/2009/06/the-myth-of-the-rational-market/comment-page-1/#comment-180189 primordial_ooze Sun, 07 Jun 2009 04:38:40 +0000 http://www.ritholtz.com/blog/?p=28410#comment-180189 So would a rational investment strategy be to keep my money in a savings account most of the time, then when a bubble occurs to invest in the bubble, double my money and get out before it collapses? I think the problem is identifying when the bubble starts. Maybe, when it looks too good to be true it must be a bubble? So would a rational investment strategy be to keep my money in a savings account most of the
time, then when a bubble occurs to invest in the bubble, double my money and get out before
it collapses? I think the problem is identifying when the bubble starts. Maybe, when it looks too
good to be true it must be a bubble?

]]> By: call me sally http://www.ritholtz.com/blog/2009/06/the-myth-of-the-rational-market/comment-page-1/#comment-180181 call me sally Sun, 07 Jun 2009 02:24:03 +0000 http://www.ritholtz.com/blog/?p=28410#comment-180181 transor Z- or another one- Native Americans are vanishing Running Bear is a Native American therefore Running Bear is Vanishing transor Z-

or another one-

Native Americans are vanishing

Running Bear is a Native American

therefore Running Bear is Vanishing

]]> By: Big book weekend - The Curious Capitalist – TIME.com http://www.ritholtz.com/blog/2009/06/the-myth-of-the-rational-market/comment-page-1/#comment-180177 Big book weekend - The Curious Capitalist – TIME.com Sun, 07 Jun 2009 01:53:56 +0000 http://www.ritholtz.com/blog/?p=28410#comment-180177 [...] Joe Nocera column in the NYT ("an engaging history"). Perhaps most important of all, there's the Barry Ritholtz instablurb: I am about halfway through The Myth of the Rational Market, and so far, its good wonky fun. [...] [...] Joe Nocera column in the NYT (”an engaging history”). Perhaps most important of all, there’s the Barry Ritholtz instablurb: I am about halfway through The Myth of the Rational Market, and so far, its good wonky fun. [...]

]]> By: Transor Z http://www.ritholtz.com/blog/2009/06/the-myth-of-the-rational-market/comment-page-1/#comment-180176 Transor Z Sun, 07 Jun 2009 01:53:01 +0000 http://www.ritholtz.com/blog/?p=28410#comment-180176 "All men are mortal. Socrates was mortal. Therefore all men are Socrates." Love that line. One of the truly annoying things about reading the legal products of Posner and the "Law and Economics" crowd influenced by Chicago is that the cult members would always "spot the efficiency" in a transaction. That is/was their thing. The desirability of insider trading and "efficient breach," for example. Insider trading, some of the hardcore Chicago legal scholars hold, is "efficient" because money flows to the better informed. Similarly, when a company can get cheaper parts from another supplier than the one they already have a contract with -- and so breaches its contract to get cheaper parts and increase profit -- these folks have been suggesting that the courts should disallow punitive damages because breaching the contract results in greater efficiencies. So when I heard the deregulation crowd appealing to "sanctity of contract" as a basis for justifying the bonus nonsense at AIG and the banks I felt more than a twinge of irony and just shook my head. “All men are mortal. Socrates was mortal. Therefore all men are Socrates.”

Love that line.

One of the truly annoying things about reading the legal products of Posner and the “Law and Economics” crowd influenced by Chicago is that the cult members would always “spot the efficiency” in a transaction. That is/was their thing.

The desirability of insider trading and “efficient breach,” for example. Insider trading, some of the hardcore Chicago legal scholars hold, is “efficient” because money flows to the better informed.

Similarly, when a company can get cheaper parts from another supplier than the one they already have a contract with — and so breaches its contract to get cheaper parts and increase profit — these folks have been suggesting that the courts should disallow punitive damages because breaching the contract results in greater efficiencies.

So when I heard the deregulation crowd appealing to “sanctity of contract” as a basis for justifying the bonus nonsense at AIG and the banks I felt more than a twinge of irony and just shook my head.

]]> By: WaveCatcher http://www.ritholtz.com/blog/2009/06/the-myth-of-the-rational-market/comment-page-1/#comment-180156 WaveCatcher Sat, 06 Jun 2009 20:53:48 +0000 http://www.ritholtz.com/blog/?p=28410#comment-180156 As long as humans are making buy/sell decisions, the market will not be rational. That's a beautiful thing, for anybody that aims to systematically beat the market. As long as humans are making buy/sell decisions, the market will not be rational.

That’s a beautiful thing, for anybody that aims to systematically beat the market.

]]> By: Ny Stock Guy http://www.ritholtz.com/blog/2009/06/the-myth-of-the-rational-market/comment-page-1/#comment-180152 Ny Stock Guy Sat, 06 Jun 2009 20:26:56 +0000 http://www.ritholtz.com/blog/?p=28410#comment-180152 People are not rational. The markets are run by people. Therefore, the markets are not rational. People are not rational. The markets are run by people. Therefore, the markets are not rational.

]]> By: rootless_cosmopolitan http://www.ritholtz.com/blog/2009/06/the-myth-of-the-rational-market/comment-page-1/#comment-180147 rootless_cosmopolitan Sat, 06 Jun 2009 19:42:02 +0000 http://www.ritholtz.com/blog/?p=28410#comment-180147 "In Mr. Grantham’s view, the efficient market hypothesis is more or less directly responsible for the financial crisis." According to this people's wrong thinking were responsible for the economic crisis of real capitalist world economy. That begs the question what causes the wrong thinking? rc “In Mr. Grantham’s view, the efficient market hypothesis is more or less directly responsible for the financial crisis.”

According to this people’s wrong thinking were responsible for the economic crisis of real capitalist world economy. That begs the question what causes the wrong thinking?

rc

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