"It's important to choose not who you think is the prettiest girl, but who the judges will think is the prettiest girl. " John Maynard Keynes (1883 - 1946)
It was an interesting week for the market. Once the yield on the 10-year treasury touched the psychological 5.25% mark, stocks immediately dropped. Then the Consumer Price Index reading came in lower than the Fed had expected, which pushed the 10-year Treasury yield lower, relieved inflation worries, and gave investors the green light to keep buying stocks...
What I find more interesting, if not entertaining, is all the economists, analysts, bloggers, and media pundits trying to figure out what is driving this market:
- Is the market overbought, oversold, under-bought, undersold, moving higher, lower, sideways or what?
- Should the market be moving lower because of lower approval ratings for the President?
- The U.S economy is growing but worldwide growth is causing inflationary pressure. Is there a "global bubble" forming with an impending "bust" on the horizon?
What I try to teach here at TFP is that the logical investor should be able to say "who cares" no matter what the market is doing. While some investors will find a way to "beat the market," either through luck or skill, the odds of doing so consistently are extremely low. Keynes's beauty contest analogy to financial markets is wise. Beauty is in the eye of the beholder and the individual investor is not the "judge" in this contest -- the market as a whole is the judge and the judge is not rational. This essentially speaks to the Efficient Market Hypothesis, which I commented on this week...
While others are scratching their heads trying to figure out what is driving the markets, the wise investor does not care to intimately know the driver: He or she is sitting comfortably in the back seat enjoying the ride...
Have a nice weekend...
TFPAuthor, Kent Thune, is the President and Owner of Atlantic Capital Investments, LLC (ACI), a fee-only, registered investment adviser based in Mount Pleasant, SC, near Charleston. ACI specializes in retirement, investments, and financial planning.
Kent,
I am a first time visitor to your blog and enjoyed my stay. I have you linked and look forward to reading your thoughts in the coming days.
If you get a chance, come on over to my new blog and poke around a bit.
Posted by: David A. Porter | June 16, 2007 at 06:07 PM