Friday, March 22, 2002
Chris Cooper as a pundit on the stock market: what a jest!
Posted today to the LA Forum:
[CC] I dare say the list is bored with this topic by now, but having just noticed
this post from Patrick [Crozier], which I'd inexplicably missed, I feel I should
respond as best I can. Which is strictly amateurishly (my wife will tell
anyone who's interested that my free advice about getting rich is worth
precisely what you paid for it).
[PC] One objection to the idea that you can't beat the market (I hope that is
indeed the idea here) is that there are clearly lots of people who ARE being
beaten by the market. That tends to imply (in a generally rising market)
that there others who are doing the beating.
[CC] You can beat the market (or be beaten by it) by chance, and a statistically
fixed proportion of people will - just as will a fixed proportion of
coin-tossers. It's whether you can do better than chance that's the issue.
[PC] But I suppose my real objection is that at the end of the day these are
businesses, making real decisions about real products and selling them to
real people. And shareholders (although many forget this) are real owners.
Shareholders are making judgements about managements and some people have
better judgement than others. If that wasn't the case then, hell, we might
as well allocate jobs by lottery.
[CC] It's true I'm accusing the customers of those funds that claim special skill
in the market (as opposed to index-tracking funds, say) of being deluded and
irrational. And that makes me sound like some socialist busybody slavering
for new regulation to save the children from themselves. Naturally, I don't
advocate that, but I do believe in the possibility of sustained
irrationality. It seems to have been demonstrated in human behaviour in the
area of judging probabilities and risks.
After all, there's a flourishing business in gambling on horse-racing; it's
irrational to take that seriously, but an entire industry is built on the
people who do.