Is stock market punditry basically a high class form of astrology? Monty Pelerin thinks so.
Well, considering that we can’t even be sure of how history happened, it’s tough to make the case that we can truly use it to predict future events…
From Economic Noise:
History is a summary of what historians consider relevant. Selectivity of a limited number of events is required. Behind these events are millions of other events and processes that must be ignored. Many of these are causal elements and not even known to the historian. What is reported is the outcome(s) of these complex interactions. Historians then focus on a few causes that rationalize the outcome(s). Often these are correlative; never do they fully explain the outcome they purport to. That is the nature of all history.
Discussing the performance of the stock market is an exercise in history. It is subject to similar simplification. At the end of each market day, analysts “explain” why the stock market went up or down. These explanations are more rationalizations than explanations. Stock market outcomes can never be explained in terms of one or two variables, regardless of how relevant they might appear to be or how enlightened the analyst sounds. Soundbites preclude more than a couple of variables. Yet complexity does not care about soundbites.
Read on, unless you like your illusions of control just the way they are.