Saturday, June 13, 2009

Economists selling visions! Step right up! Only 2% of your annual portfolio!

An interesting observation from an economics professor taken:

Anyone with a Greek background will appreciate how long people have been earning money by selling their vision of the future, without anyone, ever, evolving a methodology for doing anything better than projecting the past. When there are elements not foreseen , the Ancients spoke of the anger of the gods, alumni of the Econometrics class speak of fat tails. What is amazing, but explicable, is that the market for visions of the future continues to prosper.

If economists were good forecasters they would all be retired millionaires. The fact is, that markets lead forecasts because economists use trailing or concurrent data. Capitalists look forward at new opportunities and apply capital when there is a potential for excess return.

Economists are trend followers, they just don't know it until too late.

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