Quote of the Day: Barry Ritholtz on the outlook

By Matt Nolan 26/06/2013


Via Justin Wolfers on twitter comes this excellent quote – an answer to “what is your outlook on the markets and the economy”:

I think it is of much greater value to be able to put the current situation into broader context, via a variety of variables and factors, than make guesses about the future.

This is very true.  I’d add a little something though.  Any “forecast” we provide is really just an interpretation of evidence of where we’ve been, and where we are now.  If someone is going to give you advice about risks and challenges they should really spend more time trying to explain what is happening and the context it is within.

“Where we are now” is actually a much harder question than most people recognise, it is even harder than “where have we been” which is also incredibly difficult.  We have to have a pretty compelling, and pretty transparent, case for being able to answer those questions before we can say much about “where might we be going”.

Often when I say this to people they say “what a waste of time, I can tell you where/show you some math that says we are going”.  I’m sorry, but whenever I hear people talk this way – without a proper appreciation of where we’ve been and history – I do not expect to get much out of what they say.  I haven’t been disappointed yet!

Mathematical and statistical analysis are key, definitely, but only with a respect for historical context – which is the information mathematical and statistical models rely on in the first place.  Our apriori knowledge is not clairvoyant enough to conjure up structural breaks, or give us an objective model of reality without appeal to sense data ;)