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January 03, 2010



"Shares have risen since then because the probability of this disaster is thought to have receded."

Hasn't QE had something to do with asset price rises ?


Possibly - though I'm sceptical of how far fund managers would use cash raised by selling a safe asset to buy very risky ones.
But even if QE has contributed to rising share prices, it is consistent with my story.
In helping to unfreeze capital markets, QE has helped reduce the risk of disaster.

Luis Enrique

I couldn't agree more. I generally dislike "aren't people stupid!" arguments, but it's amazing how often journalists, for instance, fail to understand the basics of probability and what it means for a prediction to be the right prediction. I really think journalists would benefit greatly from a basic grounding in probability and statistics, hence I disagree strongly with Bryan, here:


phil jones

"This raises an interesting and often overlooked possibility - that it’s possible for stock markets to be rational and yet very often wrong."

This does seem somewhat counter-intuitive. What do we mean by "rational" if most predictions are wrong or if you can't get any concrete predictions out of them at all? Does "rational" then just mean, "follows some rules of its own, even if these don't tell us anything about our world"?

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Interesting article. I work with this company and often visit their education center: http://education.fisherinvestments.com/ It has a lot of useful information and links to a number of investing books and articles.

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