When was the last time anyone got good investing advice from the front page of a newspaper or magazine or from a television pundit?

That is the question I have been pondering during this market cycle. Whether it is the price of equities or the state of the economy, I have grave reservations about relying on the usual suspects as a source of insight. This is especially the case when the usual suspects have been so wrong for so long about these issues.

Ask yourself the following questions:

• When has the mainstream media made a timely warning about an imminent recession?

• Has the punditocracy ever correctly identified a bubble in real time?

• When have the public’s perspectives on market valuation ever been right?

Look at mutual fund flows if you want to see how wrong individuals are; check out various valuation methods to see how much bias and data cherry-picking goes on.

Continues here



Category: Cognitive Foibles, Financial Press, Markets, Psychology, UnGuru

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

9 Responses to “It’s a Bubble! It’s a Recession! It’s a Crash!”

  1. VennData says:

    … But the good thing about following a pundit’s every twitch is that you have someone to blame when you’re living in a van down by the river.

  2. ch says:

    “I prefer to identify some overlooked part of the market and expound on that.”

    You mean like foreign creditor demand for UST’s collapsing at a faster rate than 2H08?

    Think long on the potential implications of that.

  3. [...] It’s a Bubble, It’s a Recession, It’s a Crash: the Problem with the Media and Pund… (The Big Picture) [...]

  4. orsogrigio says:

    You are right. But WHY it’s like that [besides the 'personality side' and the compulsion to 'be present and authoritative] ? To me the thing seems pretty simple : pundits, gurus and the rest of the talking heads crowd simply make an HUGE confusion between extrapolation and forecasts. They extrapolate, with a more or less happy hand, and sell the result as a forecast. Now, to make a forecast you need a [possibly sound] MODEL [that is mathematical representation] of the phenomenon you are describing [weather, prices, anything since Nature uses a strict, wonderful economy of principles]. A model is independent from the scale [or X axis span], so gives you a calculated value for any X, past, present or FUTURE, so you can check past experimental values with it and obtain a statement about precision. Extrapolation, on the contrary, is the dumbest way of pouring out just numbers (and NOT forecasts). With extrapolation you IMPLY [even if you do not realize it] that ALL and ANY causes that acted in the PAST will act again and in the SAME way in the future, but, if you DO NOT HAVE a model this is just a blind game [you do NOT know what acted in the past, so HOW can you accept that those forces will act in the FUTURE ? it' like saying 'I do not know what a hen is, so the animal I have in front of me is a unicorn', just plain noise]. It is clear that in this way of ”’thinking”’ the result [i.e. the '''forecast'''] comes out ONLY of the ‘visual fitting’, so you have to SELECT the X axis span in order to have the ‘forecast’ value coming where you WANT. With this procedure you can ALWAYS move X axis span so to have any output you like best [this is most popular in the GW or AGW matters, you can '''show''' ANY temperature as to be the 'forecast' one in ANY point of future] And, btw, is the reason why short time weather forecasts are not so bad … you make an extrapolation, but KEEP the same (SHORT) X axis span of the past, so to be decently sure that the forces that moved atmosphere in last few days are STILL the ones acting in NEXT few days. When you drop the ‘few’ condition (generally not more that 4 days) you’re back in gambling … Honest forecasters usually give also a probability value, and you see it rapidly goes at or below 50 % in 7-8 days … 50% is like tossing a coin … you plainly do not need a computer for that. As I mentioned, Nature uses a limited set of ‘rules’ or ‘way of acting’, so what is good weather forecasting is good as well for prices, btw.

    • jurasta says:

      Paragraphs and dropping the all caps words might make your comment readable, just a thought.
      Oh, and come on folks it’s entertainment and all about the money. Without trades, no commissions,
      more churn the better for Wall street.

  5. Robert M says:

    Obviously you forgot Dan Dorfmann on CNN. Itis why every trading floor now has FNN on 24 hrs a day.

    • orsogrigio says:

      Sure, Robert, but I have not forgotten him, I simply do not follow markets on TV. To decode your answer I had to go and find who Mr. Dorfmann was. Still I keep to my point of view.

  6. halthouse1 says:

    I find the action in the Eurozone sovereign debt market to be a case in point. All of the so-called experts will miss the fire until it has taken over the forest.

    This is an article I found at LinkedIn on the subject:

    EU sovereign debt: Is it really different this time?

  7. NMR says:

    Totally agree. They’re usually grotesque. The most hilarious on TV are the well endowed glamor girls. The only thing that’s more grotesque is a lot of the comment one sees on blogs with an economic theme. 90% of it views economic and financial issues through a political prism of one sort or another; and the level of ignorance and naivety has to be seen to be believed.