It had two long pieces that angered me. Usually, I let these things go. It’s a waste of time trying to play Whack-a-Mole with those with whom you disagree. But I’ll waste my time this time.
1. Here is Barry Ritholtz.
Finance is filled with colorful phrases such as “Spoos,” “Vol,” “Monte Carlo simulation,” and “Gaussian Copula.” In these columns, I try to eschew the usual Wall Street jargon. But I have used the phrase “secular cycles” (most recently here), and a reader recently called me on it. To redress that error, this week I will discuss what a secular — vs. cyclical — market is, its significance and what it might mean to your portfolios.
What made me angry is that the Wall Street jargon to which he refers has some theoretical content to it. There may be erroneous assumptions baked in, and practitioners who know the jargon are capable of making really bad decisions.
But he is making it sound as though “secular market,” and in particular “secular bull market,” is a generally accepted scientific concept that can be used to predict future stock prices. I think that this article should have at the very beginning a huge disclaimer that says “I am about to present a concept that has absolutely zero rigorous research behind it.”
Every attempt to analyze the stock market must start with the efficient markets hypothesis. As far as I know, there is no alternative that is sufficiently robust to yield strong predictions of market movements that hold up for long periods out of sample.
Note that I am not saying that I can predict the market better than he can. I am not saying that there aren’t a zillion other stock market columnists serving baloney sandwiches every day. What I resent about this particular column is his sheer pretentiousness. He is passing off his baloney sandwich as if it were expert knowledge. That is what ticks me off.
2. We Need a National Food Policy, by Mark Bittman, Michael Pollan, Ricardo Salvador and Olivier De Schutter.
They do not say, and indeed they could not possibly say, that we now have a free market in food. Among other criticisms of current policy, they write,
in February the president signed yet another business-as-usual farm bill, which continues to encourage the dumping of cheap but unhealthy calories in the supermarket.
The problem is not that we lack a food policy. The problem is that these four authors would like to see a different food policy.
The article strikes me as a classic “moral will” story. That is, experts know the right policy. All we need is the moral will to execute it. There is no acknowledgment of either the socialist calculation problem (centralized experts may not have the information they need to actually make a better food policy than the market) or the public choice problem (government as an institution is ripe for capture by interest groups).
Of course, you could say that libertarians have our own “moral will” story. We think that people need the moral will to resist campaigns to put the national government in charge of everything.
I suspect libertarianism will never succeed by showing the people that they are better off by resisting larger government – not least because the people are individually powerless against government. Rather, libertarianism is succeeding in those areas, and to the extent, that government learns it is better off by adopting a presumption of liberty. It may be counterintuitive, but libertarianism’s best approach may be to convince government to free the people, even if that’s not what the people want.
Arnold,
I had a similar reaction to the food piece, except I was irritated by a different passage. After describing their desired ends, the authors write:
“Only those with a vested interest in the status quo would argue against creating public policies with these goals.”
This is where I stopped reading. The authors do not take alternate points of view seriously.
EMH has me puzzled. Since stocks are linked to the economy you must also conclude that long-range predictions of the economy are no better than throwing darts. Yet many economists seem to believe that the Fed could in fact target NGDP and therefore create the economy they want in some respect (obvisously there are plenty of variables they can’t control). Is a variable really efficient if someone can target it?
To put it more simply perhaps, the Fed COULD target the S&P 500 if they wanted to (essentially pick a value). If an entity exists that can control a variable then isn’t it impossible for that variable to be completely unknowable?
A good national food policy would be no food policy at all. If people are too poor to eat, distribute funds to them through EITC or a future, improved basic income system.
There is no food affordability problem, or housing affordability problem, or energy affordability problem. Some people are poor, period. Let’s help them and forget about misguided national policies.
On (1): Isn’t that how snake oil salesmen are successful? They say, “Look, everybody else out there is a hack, don’t trust ’em, but I’ve got the real stuff.”
Why do people keep falling for charlatans like that? “No one can predict the future, but look here, I’ve got a crystal ball!”
I echo your sentiment that it is doubly misleading for Ritholtz to dismiss concepts that are precisely-defined and meaningful (though maybe not useful) in favor of a concept that is murky, ill-defined, and lacking any scientific research backing whatsoever. He might as well talk about the wrath of the gods.
I sum up the food article like this: government got us into this mess, and only government can get us out. Strange.
Well, to be charitable to the authors of #2, I guess you could say they do have a point that with responsibility and authority divided among federal agencies, it is too easy for their policies to work at cross-purposes, and so consolidating the authority for implementing food policy into a single agency would help eliminate the problem, which is at least plausible. But it seems to me they undercut their own case here by outlining a laundry list of goals for their “national food policy” which are often pretty vague and may in fact work at cross-purposes, also.
Example: how do we ensure all Americans have access to healthful foods while also shrinking the carbon footprint of the food industry? Bringing fresh vegetables to every school cafeteria in the US during the winter months is going to require lots of fossil fuels, is it not?
Or, as another example, “Food marketing sets children up for healthful lives by instilling in them a habit of eating real food.” What exactly is “real” food? Have I been eating fake food and I just didn’t know it?
The authors are the type of people I wouldn’t expect to have even heard of the socialist calculation problem or public choice theory, so I am not bothered in that regard. What I find troubling is more their “pretense of knowledge” attitude. I am not an epidemiologist, but from my own reading on the subject, I think we know a good bit less about why obesity and Type II diabetes have been on the rise the last 30 years or so than these guys seem to want to acknowledge, and as such, I think the potential effectiveness of any national policy to reverse the trend is lot lower than they make it out to be, regardless of how well it was implemented.
The interesting thing to me about the healthy food thing is everybody is sooo sure that they know what an unhealthy diet is (burgers and fries) but there is really no strong evidence. It looks to me that as long as you do not eat too many calories (or the rare case for Americans too few) differences in where you get those calories makes very little difference. Yet we are so sure that diets low in sugar and salt and rich in fruits and vegetables will extend life. Of course we used to sure that fat was bad but now we have 2 competing campson that the low carb people and low fat people.