The other day I found myself watching a CNBC trading show, Fast Money, which had brought on Peter Schiff as a guest. At one point, Peter and one of the show hosts got into an aggressive argument. Peter tried explaining some economic theory to one show host, who then replied, “why are you talking theory, this is a trading show?”
The above statement is exactly what is wrong with the financial sector. This mindset is as foolish as a surgeon who has no respect for biology, or a farmer who has no respect for meteorology. What makes this so aggravating is that this mindset is widespread among financial analysts.
I can only guess that this mindset came about from the separation of finance and economics in colleges today. Today, a finance major can graduate after only taking the basics of micro and macroeconomics. This is very similar to, again using the same analogy, an upcoming surgeon only having a basic understanding of biology.
The finance industry is a collection of analysts who rely on nothing more than ill-conceived hunches. The most in-depth they get is when they analyze data, which they don’t realize is often deceiving or irrelevant when not analyzed in tandem with logical theory. Apart from that, they just cling to anything positive, serving to keep the populace entranced under the idea that everything is just dandy.
It is no wonder why Wall Street has failed to predict the last 3 recessions.
But at the same time I am grateful for these idiots. When making sound decisions, it’s often better to know what not to do. If you’re new to finance, and you’re not sure what to do, look at what the majority of financial institutions are doing with other people’s money. Then proceed to put your money elsewhere.