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13 comments on A gentle cough in the direction of the NYT

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TI on November 30, 2005 - 4:30am Permalink | Subthread | Parent | Comments top
Markets are for allocating resources, they are not for predicting anything. They may seem to predict because they can sometimes feel weaker signals of something that is already going on. But this is not really predicting. If the economy has started to weaken the companies adjust their expectations and plan to purchase a little less oil in the future and this shows in the markets. But the markets only react to the changing conditions, they do not predict them.

The markets did not predict the US oil peak, nor the North Sea  oil and gas depletion. They will set price for the supply and demand to meet, always.

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mikeB on November 30, 2005 - 6:48am Permalink | Subthread | Parent | Comments top
They may seem to predict because they can sometimes feel weaker signals of something that is already going on.

They also seem to "predict" because marketeers use fallacious "observational selection" in the way they interpret the market.

Another term for this is "filtering." Basically, with any predictions you want to trumpet, you highlight the "hits" and ignore the "misses."

Markets aren't merely "short-sighted." They're reactionary.

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