Friday, March 6, 2009

Maybe a Little Too Efficient?

I've never really understood why anyone would put their faith in the free market. To me, it's just like faith in god, only it makes less sense. At least god is a single actor working towards his own means. Decisions are being made in some kind of coherent fashion (even if it might look like nonsense to us mere mortals.)

Free market fuckers, on the other hand, essentially believe that a shitload of uncorrelated decisions made for a myriad of reasons by a bunch of people (many of whom are too stupid to pass college level calculus classes) somehow amalgamate together to form really good ideas! Yeah, 'cause people are so notoriously good at making decisions and their collective actions have never in the history of the galaxy created unintended shitstorms. It's like they think adding enough negative numbers together will somehow result in a positive number.

Example: let's take a look at the Dow Jones Industrial Average's gyrations du jour:

Who the fuck can look at those numbers and decide that the market is "rational?!?!?" It's swung hundreds of points, in both directions, IN A SINGLE FUCKING DAY!! What possible meaningful absorption and analysis of information could be going-the-fuck-on? How is that anything other than just noise? Efficient market my ass. IT'S A FUCKING RANDOM NUMBER GENERATOR.

Wait a second... I'm looking at it more closely now.. and... wait is that... OMFG GOD! THAT'S JESUS'S IMAGE IN THOSE SQUIGGLES! PRAISE THE LORD! HALLELUJAH! IT'S A MIRACLE! Surely god is watching over all of us! If only those traders would see the light, then the Dow would climb so high that the lord himself could touch it! Let Jesus into your risk analysis and be saved! AMEN!!!

Fucking idiots.

On a side note, I just read that religious people's brains are deficient in figuring out their own errors (or taking responsibility for them). Viewing free-market leg-humping as the religious fervor that it truly is, those results certainly explain McArdle, don't they? It explains a couple of religious ex-girlfriends of mine, too! Oh shit, my bitter is showing.


brad said...

Not to defend the markets, but a swing of a tiny percent of the total value each way over the course of a day doesn't really show the Dow is irrational.

NutellaonToast said...

It's not a tiny percent, it's a few percent and it's everyday.

When shit is not hitting the fan, the Dow doesn't fluctuate by whole percentage points on a daily basis. The swing on that graph is 5%, and I just happened to pick a random day. I bet there are other days when it's worse.

bulbul said...

Today DJIA moved between 6469 and 6874, that's 405 points or something in the neighborhood of 6%. If I'm reading this correctly, then NoT is right - 6% is not that common.
Anybody seen Thursday's Stewart and Colbert? They had a few things to say on the subject of DJIA and market analysts and nailed it, as usual.

I just read that religious people's brains are deficient in figuring out their own errors (or taking responsibility for them).
Yeah, and I just read that they found the oldest words in English and that the word "dirty" is going to disappear. You of all people should know better than believe everything you read.

Marshall said...

Right now the only thing the market is showing is short term profit taking. Someone see's a gyration in a stock buy's it up and then sells it. Tada 400 point movement in the market.

The market is still overvalued. But there is still a hell of a lot of money out there ready to swing in the short term.

brad said...

bulbul, the problem with your link is it's about differences from opening to closing, not swings in a single day's trading.
Nutella, my problem is you haven't given any reason to think it's irrational activity. As far as I know that kind of range isn't abnormal, especially in turbulent times.
I'm not claiming the market is inherently rational, I don't think it is. I just don't see where an activity range of 400 points in a day where it closed up a few dozen points is such a big deal.

bulbul said...


yeah, you're right. I couldn't find any data on fluctuations, but it's not like I was looking too hard. I can haz Atlantic job nao?

spencer said...

NoT, you basically described the revelation I had years ago that convinced me to drop out of my econ Ph.D. program and pursue a different field of study. The entire discipline is based on the assumption of rationality, which falls apart the minute you look closely at the way things actually work.