Ritholtz on Uncertainty

Run, don’t walk to read Barry Ritholtz‘s first column at Bloomberg on the Uncertainty Myth…

“The markets hate uncertainty.”

If you wandered anywhere near a television in advance of the midterm elections, the Federal Open Market Committee meeting or October’s employment report, that cliche was unavoidable. It was the pundits’ preferred proverb.

Wall Street has a sweet tooth for such investing maxims. They infect the trading community like influenza in December. Repeat mindless dictums ad nauseum, and they soon become the accepted wisdom.

The problem with these supposed truisms is they are no more accurate than the flip of a coin. A closer look at this uncertainty meme reveals it to be a false-ism — one of those emotionally appealing phrases that ping around trading desks. The lack of evidence supporting their premise seems to matter very little.

To recognize how meaningless these statements are, consider the opposite: Could markets function without uncertainty? It takes only a little thought to realize that markets actually thrive on doubt, imperfect information and a lack of consensus.

It’s just an absolutely killer piece, you’ll never be able to hear someone blathering about “uncertain markets” again without chuckling to yourself.  Head over for the rest below.

Source:

Kiss Your Assets Goodbye When Certainty Reigns (Bloomberg)

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