Talking War and Market Volatility With a Giant of Economics
“Basically, we are in a period where we have injected uncertainty into the world, so speculative prices are going up and down in response,” he said. “People are constantly trying to evaluate information. But it is impossible for them to come up with good answers, given the amount of uncertainty that is out there.”
“But that doesn’t mean the market is incompetent,” he said. “Markets can be rational without politics being rational or people always being rational. The problem with pricing is how much is knowable right now. How will this Russia thing play out? Who knows?”
I said I definitely didn’t.
“Does anyone have a better answer than this? I don’t think so,” he said.
You call that investment research?
I asked if he was reading analyzes by Wall Street investment houses such as Goldman Sachs or Morgan Stanley, or by independent market researchers. They do not predict how the war in Ukraine will end. But they often recommend strategies for dealing with turbulent markets at the start of a new Cold War and of course an era of high inflation, isolated supply chains and extreme volatility.
“No,” he said. “I haven’t read any of these. This is investment porn,” he said.
I was taken aback. “It’s a little harsh, isn’t it?”
“Maybe. But that stuff isn’t based on in-depth research. What do they really know?”
I mentioned that some people at investment and research firms know a lot. Some are economists trained by the University of Chicago and other good institutions. They laughed. “Okay,” he said. “I understood.”
In fact, his frequent research partner, Kenneth R. Along with French, he is on the board of directors of Dimensional, a major investment fund company, and advises on its research, which relies heavily on his work. Much like Vanguard, the indexing giant eschews dimensional market timing and generally recommends long-term, diversified, buy-and-hold investments, precisely because market returns are so difficult to predict accurately. Is.
I told him that I am getting the market analysis from dimensional. “how does it look like?” He asked. I assured him that he was generally quite careful and did not make claims of omniscience that could not be supported.
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