Yes markets make mistakes so what?So does gurus or 'technical' indicators, regulators, econometrics etc. Empiral evidence suggests markets beat the majority of systems or people so they ARE good guide for the future even though its an imperfect one Its like you are suspecting Federer will beat Nadal on their next meeting because of a physical problem Nadal has. If you look at the betting line and Fed is a 2-1 favorite it just simply CANT help Nadal chances that this 'guessing machine' that gets it right more often than most is agreeing with your view
its funny, taleb in the CR interview says market gets it terribly wrong, but has the exact opposite conclusion. What I dont understand is how so many people can dismiss him even though he wrote about this happening in the Black Swan. There millions of investors praying that this system gets going again
I guess this is an argument between me and him. not between me (hiding under an internet alias) and ppl that act as his "defenders".
He's right about a lot of things, but he ignores Soros' also valid idea of reflexivity. Trends can be self reinforcing... ie if deflation sentiment kicks in, managers stop capex, people stop spending, they sell stocks... This can go on for a while... It can be a bubble in both directions. What happens to 'cash is king' when the Fed is printing money without abandon? People panic away from cash to anything with physical value. That reflexivity can be undone just as quickly as it is wound up. Time and more importantly value (ie earnings) will solve the overhead supply issues. Money supply will replace credit, and eventually serve to increase credit flow in nominal terms.
This is what most people dont get. The true reflextivity trade is for a deflation. its the ultimate contrarian bet because it hasnt worked in 70 years. I dont think youve read either of his books. He talks about Soros in both of them
No but that's my point. reflexivity leads to bubbles in either direction. I read the Black swan book and liked it. But I think Taleb's prognostications of continued reflexivity are merely prognostications worth no more than a coin toss. There are some serious forces trying to undo this reflexivity. If this were true free market without government intervention, I'd agree with you. But that's not the game we are (or ever were) playing.