Wille Faler’s Buzzword Bingo

As mentioned in my previous post, Time magazine was of the same opinion as me to the causes of the recent drop in the markets.

Now it seems like the latest issue of business weekly The Business (paper issue) is confirming some of my other predictions/conclusions:

• Back in April, I said that the current levels and price growth in the London housing market are unsustainable. The Business reports that the price of the average home in London fell in July from £400000 to slightly over £394000. This is the first drop in many years.
• The other day, I wrote about the fallacy of trying to predict future events based on the past. The Business also reports that hedge funds that used computer based statistical models to predict market movements went haywire during the drop in the markets:

The trouble was, when markets suddenly started to turn volatile, much of the historical data on which quant funds based their trading on turned out to be useless. “Events that models only predicted would happen once every 10000 years happened every day for three days”, noted Lehman’s Matthew Rothman in an analysis of why the funds had done so badly.

So stupid, yet predictable. If an event is considered so “out there”, and so rare that people think it will only happen every 10000 years, chances are they actually have absolutely no clue whatsoever as to the events likelihood or frequency, and that they are doing nothing other than guessing in the dark.