Posts filed under “Philosophy”

Scott Adams Discovers Market Manipulation

Regular readers know I am a fan of Scott Adams, creator of the comic Dilbert and occasional commentator on a variety of matters.

He has a somewhat odd blog post up, titled, Here Come the Market Manipulators. In it, he makes two interesting suggestions: The first is to decry “market manipulators,” who do what they do for fun and profit to the detriment of the rest of us. The second is to say that these manipulators are likely to cause “a 20% correction in 2013.”

Let’s quickly address both of these issues: First off, have a look at the frequency of 20% corrections in markets. According to Fidelity (citing research from Capital Research and Management Company), over the period encompassing 1900-2010, has seen the following corrections occur:

Corrections During 1900 – 2010

5%:  3 times per year

10%:  Once per year

20%:  Once every 3.5 years

Note that Fido does not specify which market, but given the dates we can assume it is the Dow Industrials. (I’ll check on that later).

Note that US market’s have not had a 20% correction since the lows in March 2009. I’ll pull up the relevant data in the office, but a prior corrective action of 19% is the closest we’ve come, followed by a ~16% and ~11%.

As to the manipulators of the market, I can only say: Dude, where have you been the past 100 years or so?

Yes, the market gets manipulated. Whether its tax cuts or interest rate cuts or federal spending or wars or QE or legislative rule changes to FASB or even the creation of IRAs and 401ks, manipulation abounds.

In terms of the larger investors who attract followers — I do not see the same evidence that Adams sees. Sure, the market is often driven by large investors. Yes, many of these people have others who follow them. We need only look at what Buffet, Soros, Dalio, Icahn, Ackman, Einhorn and others have done to see widely imitated stock trades. But that has shown itself to be a bad idea, and I doubt anyone is making much money attempting to do so. And, it hardly leads to the conclusion that any more than the usual manipulation is going on.

Will be have a 20% correction? I guarantee that eventually, we will. Indeed, we are even overdue for it, postponed as it is by the Fed’s manipulation.

But I have strong doubts it is going to be caused by a cabal manipulating markets for fun & profit. It will occur because that’s what markets do . . .




Dilbert’s Unified Theory of Everything Financial’  (October 15th, 2006)

7 Suggestions for Scott Adams (November 27th, 2007)

Don’t Follow Wealthy Investors, Part 14 (February 17th, 2008)


Category: Markets, Philosophy, Really, really bad calls

More Information

I’m a researcher. Let me give you the latest example… My headphones broke. You know, the connection, by the plug, so that one ear goes in and out. In the seventies, you’d get this fixed. Today, it costs more to repair than to rebuy, and the art of repair seems to have gone by the…Read More

Category: Philosophy, Think Tank

Romancing Alpha (α), Breaking Up with Beta (β)

Since it is a Friday (following Valentine’s Day), I want to step back from the usual market gyrations to discuss a broader topic: The pursuit of Alpha, where it goes wrong, and the actual cost in Beta. For those of you unfamiliar with the Wall Street’s Greek nomenclature, a quick (and oversimplified) primer: When we…Read More

Category: ETFs, Investing, Philosophy

Mea Culpas for 2012

Every year in January, I look back at the prior year to assess the various errors, mistakes and bad calls that I made in the course of running an asset management business. I make a list of these mistakes, analyze why they occurred, and what I can do to avoid similar errors in the future….Read More

Category: Apprenticed Investor, Philosophy, Psychology

Things I Don’t Care About

Last year, I noted in the Price of Paying Attention that listening to all of the noise out there hurts your investing returns. If you digest a lot separate sources, if you crave input, if you are entertained by current events, you run the risk of getting distracted by a huge amount of meaningless junk….Read More

Category: Financial Press, Investing, Philosophy, Psychology

Discuss: Barack Obama is a Liberal Republican

I have been having fun mocking friends and family on both sides of the political aisle.  GOP colleagues who keep telling me BHO is a Socialist, while Dems think he is the next JFK. I enjoy disabusing them of their political biases by explaining to them Barack Obama’s actual politics. Politically, he is a modern…Read More

Category: Current Affairs, Philosophy, Politics

Amazon Changes its Review Policy (but not enough)

Amazon has been one of my favorite retailers, ever since my college roommate gave me an Amazon gift certificate for the holidays in 1998. The reviews are a large part of it. I think it is a crucial aspect to their business model — having trusted 3rd parties giving fair reviews of books and other…Read More

Category: Philosophy, Web/Tech

The Pernicious Staying Power of Really Bad Ideas

> My Sunday Washington Post Business column is out. This morning, we look at the pernicious staying power of bad ideas. The print version had the full headline Zombie ideas: Why don’t bad notions ever die? while the  online version is the simpler: Why don’t bad ideas ever die? Here’s an excerpt from the column: “This…Read More

Category: Investing, Philosophy, Psychology, Really, really bad calls

The London Almanack (Revisited)

I bought a stack of rather old books at an estate sale some years ago. Within the lot I purchased was a tattered, leather-bound, compendium containing six years of “The London Almanack” running consecutively from 1853 through 1858. Thumbing through its worn and mildewed pages I chanced upon general interest articles of the day, court…Read More

Category: Philosophy, Think Tank

Defining Risk Versus Uncertainty

Longtime readers will recall that I find the Uncertainty meme to be mostly silly (see this and this). The foolishness continues to come up amongst allegedly serious people. I find many of these folks (mostly) devoid of original thought, choosing instead to repeat things pundits of questionable insight have previously said (PoQI™ is a registered trademark…Read More

Category: Mathematics, Philosophy, Really, really bad calls