Monday, September 1, 2008

Average Versus Expert - The Winner Is ...

Stuck in the middle
market average trends
"Wall Street might be flummoxed and Fed Chairman Ben Bernanke might be wringing his hands over the inflation outlook for the rest of the year, but it turns out it's not that hard to predict rising prices. All you need to do is pay for gas and groceries.

A study examining 30 years of data found that consumers using intuition are just as accurate as economists using complex formulas for predicting inflation."

Associated Press

It's intriguing, thought provoking and at some level obvious that the winner is the average. After all it is the famous bell curve, the law of large numbers, the combined intelligence of the many ...

Or maybe it is as simple as - we are dealing with it so we know about it. No special computer models or fancy spreadsheets required to ascertain that gas cost $4/gallon, groceries cost a lot more, eating out is more expensive and house prices are falling.

Is the overall market an average? What are the obvious trends and influences affecting our lives? What business is thriving and will continue to do well? What is the sentiment of the consumer? The macro trends and average predictions are much more reliable than the expert premonitions of imminent change in market conditions.

If you are unconvinced who to believe just consider the fact that officially the US economy is robust and growing. Growing as fast as 3.3% in Q2 - so one wonders what all this bearishness and whining is all about!

"The American economy was more robust in the second quarter than previously reported, according to revised figures that show growth of gross domestic product for the period was 3.3 per cent, ahead of previous estimates of 1.9 per cent. "

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