(no subject)

[randomness]

Meteorologists are much more accurate much more of the time than financial pundits, but because everyone thinks they understand the weather, everyone feels like they're an expert.

The financial pundits have a great gig.

Comments

[happyfunpaul.livejournal.com]

Results/feedback is also clearer. "6 to 10 inches" predicted, "less than an inch" actual = WRONG. Every day a meteorologist gets a grade that's clear and immediate. With finance? Not so much.

Not just finance, either. Lots of professions involve judgments that are difficult to check, or at least with results so delayed that no one thinks to check. (I have a fondness for those who, for example, go back at the end of football season and check the prognosticators' accuracy at the start of the season.)

[r-ness.livejournal.com]

Well, results/feedback are extremely clear and quantifiable in finance in terms of price. If some overpaid moron in a suit tells you that gold is going to $2500 in 2009, for example, you can look back and--to use your construction--$2500 predicted, $1200 actual = WRONG.

However, my feeling is that achinhibitor has the right idea; if I know that it's going to do that, I'm not going to tell anyone, I'm just going to make a killing on it instead.

Now that I think of it, I think that's the key difference: my making weather predictions on the Weather Channel doesn't change the result, while my making stock picks on CNBC likely will. And if I am on CNBC, I'm certainly going attempt to take advantage of that and talk my book and make money.

The thing I think is amazing is that people continue to listen, when the results cost them money.

[achinhibitor.livejournal.com]

Not to mention that the people who can really make accurate predictions in the financial markets aren't flapping their lips on Channel 7 News. I seem to remember several financial institutions were selling all mortgage-backed securities sometime early in 2008, and one hedge fund made a killing by shorting them.

[r-ness.livejournal.com]

Yeah, I think you have nailed it in one. There's no incentive, and in fact a great disincentive, to telling anyone what you're actually doing. Giving misleading ideas that will make you more money by getting others to run after you? That's what you're likely to predict.

"Now, about those Greek CDS spreads..." :)

[achinhibitor.livejournal.com]

"I'm not a financial guru, but I play one on CNN."

[r-ness.livejournal.com]

Yeah. Or the one that says that economists have predicted nine out of the last six recessions.

[r-ness.livejournal.com]

To be fair, I'm not actually talking about economists so much as I'm talking about financial prognosticators. There are a lot of economists who refuse to play that game, and most of the finance talking heads aren't economists.