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Tell Me Again About Your Models
Despite (and often because of), my overtly pessimistic take on the plight of humanity, I find occasi
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Lots of billionaires get air time but billionaires who were pioneers often don’t. How often do you hear from Jim Simons? (Of course, why would he want public attention?) If net worth means anything in regards to predictions, Jim Simons is worth three Paul Tudor Jones. It is all noise. I would listen to predictions by the philosopher Thales (on olive presses) or Simons but not anybody on CNBC (or Bloomberg).
Powell has repeatedly said (reading between the lines), that he is NOT raising interest rates….almost REGARDLESS OF WHAT HAPPENS WITH INFLATION ( sorry about the All Caps, but I just finished rereading ‘A Prayer for Owen Meany’).
The Fed does not even care about the inflation in higher education or medical costs- two areas where government intervention resulted in significantly higher, not lower, costs….and I do not believe they care about CPI, either!!!
The USA can not afford higher rates- end of story.
Don’t fight the Fed.
Seams like you don’t subscribe to the theory of the Block Universe (it all being predetermined)?
The crystalline concision, with a damn-near-iambic-pentameter rhythm, of your description of the S&P 500 is classic Heisenbergian style. Another great column. Thanks, H.
Thanks for calling that out. I went back to re-read it. You’re right.
H
Thanks for this great take. For those who want to say something like … harrumph, so and so can do this prediction stuff … No he can’t. Nobody can. There are only two time frames possible in the universe of security prices, the past and the future. Since forecasting the past isn’t useful, only the future is interesting. BTW, before continuing I should say that I was a participant in a meeting of the Eastern Finance Association some years ago where I was privileged to listen to the presentation of a paper reporting the results of an exhaustive study of the ability of qualified financial analysts to predict corporate earnings ,,, in the past. Picture that, folks. These were analysts who would update their estimates of corporate performance every quarter, including the year end numbers — after the year was over. Even though the year was over these analysts were shown to be only about 90% accurate in predicting the past year’s results. After I heard that paper I pretty much decided that the direction academic finance was taking was a waste of my time and I started focusing on other areas I could teach without laughing out loud.
So, as to predicting the future, note that stock prices are found to be continuously distributed in the past and the future out to infinity. Continuous distributions are characterized by containing an infinite number of individual points. Therefore, the probability of predicting any specific point in that distribution for any time in the future may be found by the equation: Probx = 1/infinity, which any good math whiz will tell you equals zero. It can’t be done for two reasons. First, a specific point in a continuous distribution is infinitely small. Second, the values of the individual points in the distribution are, by definition, unknown so good luck guessing the point value of any one of them.
As always, H has it dead on. Thank you, again, sir, for one more try to dispel the myths surrounding market forecasts.