In the 1940s and 1950s Theodore Sturgeon was America's most popular
science fiction writer.
Sci-fi had already gained a reputation for "schlock." Much of
it... if not most... was dreadful.
Sturgeon, tired of spot-defending the genre he loved, made a counterclaim.
As he wrote in 1958:
Using the same standards that categorize 90% of science fiction as
trash, crud, or crap, it can be argued that 90% of film, literature, consumer
goods, etc. are crap. In other words, the claim (or fact) that 90% of science
fiction is crap is ultimately uninformative, because science fiction conforms
to the same trends of quality as all other art forms.
Whether you're talking about books... movies... music... political
platforms... or new fashion trends, Sturgeon's law holds true. It is hard to
avoid the crap.
This applies to financial forecasting too. Much of what the man in
the street will absorb about markets... and what he should do with his money
is... hokum.
There are many reasons for this. For instance, a mantra of the Wall Street talking heads
goes as follows: "If you must forecast, do so early and often."
The idea is that if you make lot of predictions, you have better odds of
hitting a bull's-eye that you can trumpet later. You sweep the others under
the rug.
This makes Sturgeon's Law a self-fulfilling prophecy. Here's how it
works...
The airwaves and print media fill up with dart-throwing "market
calls" that the forecasters would not stake a nickel on. (Unless it is
someone else's nickel.) As these junk forecasts pile up, the few that hold
value get buried in the muck. Sussing them out becomes a tedious and nasty
process -- like dredging for diamonds in a septic tank.
Wall Street
forecasters clearly have a quality problem. But they have another problem
that just as serious. They have a relevancy problem.
When they aren't busy drawing conclusions that are bad, Wall Street's
finest are obsessing over data points that hardly matter at all.
On a random Friday, for instance, an uptick in the jobs report might be
treated as earth-shattering news. Two or three days later, a downtick in the
ISM Manufacturing Index comes along and cancels out the uptick.
Then the pièce de résistance: Both stories are swamped -- like
tugboats in the wake of an ocean liner -- by a panic response (either bullish
or bearish) to some Capitol Hill pot-stirring.
And so it goes...
What is the antidote to Sturgeon's Law? How can you inoculate yourself...
and your wealth?
A Canadian fellow called Don Coxe got it right. Coxe spent 20 years
analyzing and dissecting global markets. His flagship
publication, Basic Points, was born in Toronto and ran from 1982 to
2012.
In its 20th anniversary issue Coxe reminded readers of what made Basic
Points special:
[W]e have tried to focus on the "big picture" stories that
future economic historians would write about, not the short-term jiggles and
trading tips that tape-watchers tend to crave.
There's your antidote: Focus on the big, long-term trends... not
the day-to-day market noise.
Another insight into coping with Sturgeon's Law came from E.O. Wilson, one
of the great biologists of the 20th century:
We are drowning in information, while starving for wisdom. The world
henceforth will be run by synthesizers, people able to put together the right
information at the right time, think critically about it, and make important
choices wisely.
As a basic blueprint for lasting prosperity in a turbulent age... your
humble editor could hardly have said it better.
Carpe Divitiae,
Justice Litle
P.S. Next week, I will share with you three specific ways
you avoid muddled thinking and tell "good" predictions from
"bad" ones. Stay tuned...
Have You Heard About Canada's
Silver Secret?
Our friendly neighbor to the north lays claim to a little-known silver
secret...
One that could be safer and more lucrative than any other type of silver
investment you've heard of before.
Since 2008, its price has even soared 10 times higher than that of
physical silver... In fact, it has nothing to do with mining stocks, silver
coins, options or ETFs.
For the full details behind this secret, simply click here
now.
Other Related Articles
