NEW YORK — Stocks gained momentum on Monday, with the Dow Jones Industrial Average closing up 48 points, reversing losses from last week’s decline.
Experts hailed both moves as a “remarkable, textbook example of pure statistical chance,” chalking up Monday’s gains to a couple random marginal buyers being slightly more motivated than a few random marginal sellers.
“Imagine you pick 1 million random people from around the world every day,” said Toby McDade, chief investment officer of Momentum Fee Capital Management. “Some days, 51% would be in a good mood, 49% in a bad mood. The next day maybe it’s the opposite. Other days, random chance could mean 8% of people are really pissed off for no real reason. This is basically what the market is on a day-to-day basis,” he said.
Satire, obviously, but it might as well not be. I’ve long maintained that nobody, not even (and perhaps especially) economists, understand economics. It’s a fundamentally chaotic system and at best your years of training and practice on the stock market will give you the edge over a layperson; the fact that some people appear to be doing better is most-often a result of the fact that those who’ve been lucky historically are more-likely to stay in the game for long enough for you to observe how lucky they’ve been (I’m reminded of the old “tipster scam” where a scammer would send guesses as horse racing tips for free, and then to the people to whom the scammer had by chance sent good tips they’d charge for future tips, with increasing cost for the punter the more times the scammer had gotten lucky by chance).
But enough of my ranting. Go read this funny article.