"I believe that market prices are always wrong in the sense that they present a biased view of the future. But distortion works in both directions: not only do market participants operate with a bias, but their bias can also influence the course of events.
For instance, the stock market is generally believed to anticipate recessions, it would be more correct to say that it can help to precipitate them. Thus I replace the assertion that markets are always right with two others: I) Markets are always biased in one direction or another; II) Markets can influence the events that they anticipate.
As long as the bias is self-reinforcing, expectations rise even faster than stock prices.
Nowhere is the role of expectations more clearly visible than in financial markets. Buy and sell decisions are based on expectations about future prices, and future prices, in turn are contingent on present buy and sell decisions."
user21952 /
npub18n…dnfys
2022-02-13 20:15:18
Author Public Key
npub18nyjdwkcraqj3d796z8ynggztcqjp5et0y59l5leku86yszfjtjsndnfysPublished at
2022-02-13 20:15:18Event JSON
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"pubkey": "3cc926bad81f4128b7c5d08e49a1025e0120d32b79285fd3f9b70fa2404992e5",
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"kind": 1,
"tags": [],
"content": "\"I believe that market prices are always wrong in the sense that they present a biased view of the future. But distortion works in both directions: not only do market participants operate with a bias, but their bias can also influence the course of events.\n\nFor instance, the stock market is generally believed to anticipate recessions, it would be more correct to say that it can help to precipitate them. Thus I replace the assertion that markets are always right with two others: I) Markets are always biased in one direction or another; II) Markets can influence the events that they anticipate.\n\nAs long as the bias is self-reinforcing, expectations rise even faster than stock prices.\n\nNowhere is the role of expectations more clearly visible than in financial markets. Buy and sell decisions are based on expectations about future prices, and future prices, in turn are contingent on present buy and sell decisions.\"",
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}