Posted by Marc Hodak on May 21, 2007 under Patterns without intention | 
The WSJ is trying its damnedest to disprove my theory that education makes a difference. In this story, tautologically headlined “In a Volatile Market, the Winning Analysts Had Their Timing Down,” they compile a list of Wall Street analysts based on the performance of shares they recommended. This is their 15th annual ranking of analysts, which means that this intellectual embarrassment was inaugurated when 20 years worth of papers had already accumulated providing empirical evidence that stock picking prowess was a largely illusory phenomenon. Yet the Journal still writes stuff like this:
Although there are many ways to rank analysts, this survey is strictly quantitative and based solely on stock picking skill.
Here is a funny definition of skill: luck.
One of the attributes of skill, the reason you know that Tiger Woods is skillful instead of lucky, is that skill results in performance persistence. A top athlete will consistently beat a mediocre athlete over any period of time. Wall Street pros, at least those with public records, don’t display this persistence. Neither analysts nor fund managers tend to stay on top from one year to the next with any greater frequency than a group that had good results picking stocks by throwing darts. Here is how the Journal interprets this phenomenon:
Several firms that performed well in previous years were tripped up by last year’s volatile market. A.G. Edwards & Sons, a unit of A.G. Edwards Inc., the No. 1 firm with nine awards a year ago, fell to No. 31 on this year’s list, with just three winning analysts. Citigroup Inc., which ranked second a year ago, sank to 49th place. Credit Suisse, a unit of Credit Suisse Group; Standard & Poor’s Corp., a division of McGraw-Hill Cos.; and J.P. Morgan Chase & Co., which rounded out the top five a year ago, all failed to place in the top 20 in this year’s survey.
Sigh.
Posted by Marc Hodak on May 16, 2007 under Patterns without intention |
Don Boudreaux writes a magnificent update on how markets under property rights solve what Hayek called the knowledge problem of economics.
There are precious few people who any longer believe that central planning can satisfy even the most basic needs of any society. Unfortunately, most of them are running for President.
But seriously, it has been 60+ years since Hayek published his theory about why central planning was bound to fail. In that time, dozens of live experiments in central planning have been tried, some resulting in the privation and famine deaths of millions of souls. Still, very few people are taught economics, or its knowledge problem, or its solution. So, while the big experiments in central planning are hopefully over for good, we no doubt have many little, live experiments ahead.
Posted by Marc Hodak on April 30, 2007 under Patterns without intention |
Why is a French socialist politician vowing to form an “anti-liberal” party? In Europe, liberals are those who believe in free markets. That’s what “liberal” used to mean in the U.S. before the Progressive movement and its Democratic enablers flipped the meaning around. So, now America’s leftists are called “liberals” while America’s true liberals have had to adopt more cumbersome tags like “classic liberal” or “libertarian.” Confusing? Don’t sweat it. Even the WSJ is labeling the left candidate in France as “liberal” in a chart about recent elections there. Since I am writing about Europe today, I will use the term “liberal” here in the classic sense, consistent with European usage.
So, back to the French socialists–why are they feeling so threatened about (economic) liberalism? Because their candidate, Segolene Royal, is now courting the “centrists” for their votes in the upcoming general election for French president. And why is she courting the centrist vote, even at the apparent risk of alienating her left wing? Because even in France, the left wing is becoming marginalized. France’s left wing is now pulling about 10 percent of the vote, a significant drop from the 1970s and 1980s when they were able to elect a Socialist president. Last weekend, Royal got 25 percent of the vote. That means that 65 percent of France is currently to her right, and she needs at least 15 percent of them to win the Presidency. That puts her in a bind, since what she gains by tacking right risks losing support on her left.
But I don’t really give a darn about Royal, or even her opponent Sarkozy. It’s France. Historically, Marx skipped over France on his way from Germany to England, but his ideas nevertheless took firm root in their powerful labor class. Even their “conservative” party is beholden to unions and nationalists. What catches my eye is the overall trend that is emerging in France, as in the rest of the Europe and the world. Politicians all over have no choice but to cater to their voters needs. Even if most voters are economically ignorant, and they think they need government intervention, reality eventually catches up, and the people and their politicians are compelled to acknowledge the competition for capital.
In the long run, this competition for capital will force a competition for productive businesses and individuals. The governmental bumps that try to regulate the inflow and outflow of people and money will get smoothed away in an ever flattening world. Even the U.S., so far ahead in capitalism for so long that it could actually go counter to the general liberalizing trend, will be forced to arrest its socialization, and join the race to greater freedom. In the future, we are all capitalists.
