by adam on October 8, 2010
THE BLOOMBERG EXPLANATIONS
As I am writing these lines I see the following headlines on my Bloomberg: —-+ Dow is up 1.03 on lower interest rates. —-+ Dollar down 0.12 yen on higher Japanese surplus and so on for an entire page. If I translate it well, the journalist claims to provide an explanation for something that amounts to perfect noise. A move of 1.03 with the Dow at 11,000 constitutes less than a 0.01 % move. Such a move does not warrant an explanation. There is nothing there that an honest person can try to explain; there are no reasons to adduce. But like apprentice professors of comparative literature, journalists being paid to provide explanations will gladly and readily provide them. The only solution is for Michael Bloomberg to stop paying his journalists for providing commentary. Significance: how did I decide that it was perfect noise? Take a simple analogy. If you engage in a mountain bicycle race with a friend across Siberia and, a month later, beat him by one single second, you clearly cannot quite boast that you are faster than him. You might have been helped by somerhing.ior it can be just plain randomness, nothing else. That second is not in itself significant enough for someone to draw conclusions. I would not write in my pre-bed-time diary: cyclist A is oetter than cyclist B because he is fed with spinach whereas cyclist B has :2 diet rich in tofu. The reason I am making this inference is because he beat him by 1.3 seconds in a 3,000 mile race. Should the difference be one week, then I could start analyzing whether tofu is the reason, or if there are other factors.