Are "experts" usually this confused?

[MustacheAndaHalf]

The article which motivated this thread was written by a reporter.  Not someone in the investment industry, but someone who profits when more people read their article.  They don't have a reputation at risk, or experience that informs the article.  In short, they're not an expert.  I think that's the first step that almost nobody takes: define an investment expert, and stop listening to those who don't match the definition.

[Dicey]

Gonna slightly necro this thread with a few thoughts. I say all of this as a weak-form EMH believer who owns nothing but index funds.

1) The core conceit of the post is that if expertise exists, experts must never disagree, which is just so obviously asinine on its face it barely needs addressed. But I will give it a shot. Medicine is a craft in which a large amount of knowledge is used to make decisions with a constrained set of facts and necessary uncertainty. If two skilled doctors disagree, that could reflect a) constraints on the set of facts used as basis for the opinion, b) constraints on the decision-making process itself, c) different attitudes towards risk by different practitioners, d) different risk capacities for different subjects, e) legitimate differences of opinion from practitioners trained in different theories, each of which may be more applicable in some circumstances than in others, or f) actual differences in skill. In our finance example you have all of the above - plus the fact that unlike medicine, in finance different market participants have different goals, plus the fact that the market is necessarily a zero-sum game.

2) Nobody puts up a thread on a health subforum saying "livestrong.com says eggs will kill me but wikihow says eggs will add four years to my life - checkmate, science!". Actual experts, were they to exist, would not write on a free website not respected by the actual industry for free consumption by unaccredited retail investors unless there were literally no other outlet. If you accept that there is actually such a thing as investing skill, the most skillful people would head to where the compensation is greatest for their craft (hedge funds >> family offices and other funds >> mutual funds >> sell-side institutions >> reputable trade press > general audience press > literally anything else > graffiti in the 7-11 bathroom > yahoo finance).

Love this analysis!

[nereo]

The article which motivated this thread was written by a reporter.  Not someone in the investment industry, but someone who profits when more people read their article.  They don't have a reputation at risk, or experience that informs the article.  In short, they're not an expert.  I think that's the first step that almost nobody takes: define an investment expert, and stop listening to those who don't match the definition.

yes, absolutely consider the motivations and qualifications of the person making the claim.
But... the track records for bona-fide 'experts' in predictive forecasting of the markets remains abysmal. Even the most experienced, financially educated and institutionally endowed financial experts (as a group) aren't able to predict where the market will be several months in advance.  That's not a knock on their intelligence or ability, but an acknowledgment that markets are chaotic and inherently subject to external, quasi-random factors.

[Metalcat]

The article which motivated this thread was written by a reporter.  Not someone in the investment industry, but someone who profits when more people read their article.  They don't have a reputation at risk, or experience that informs the article.  In short, they're not an expert.  I think that's the first step that almost nobody takes: define an investment expert, and stop listening to those who don't match the definition.

yes, absolutely consider the motivations and qualifications of the person making the claim.
But... the track records for bona-fide 'experts' in predictive forecasting of the markets remains abysmal. Even the most experienced, financially educated and institutionally endowed financial experts (as a group) aren't able to predict where the market will be several months in advance.  That's not a knock on their intelligence or ability, but an acknowledgment that markets are chaotic and inherently subject to external, quasi-random factors.

Most of my friends have doctorates of one sort or another, and are successful professionals in their fields. So they're legitimate subject matter experts. And yet I catch them saying bonkers, flat out wrong bullshit all the time.

Granted that's because a lot of what they are taught to believe is provably wrong. But point being, many, many experts are confused/full of shit, especially those who try to predict the future.

"Expertise" is highly fallible, and that's not a criticism, it's just a matter of fact. Expertise is generally the best level of reasonable knowledge available at the time, and that's just the best we can get.

[ChpBstrd]

The article which motivated this thread was written by a reporter.  Not someone in the investment industry, but someone who profits when more people read their article.  They don't have a reputation at risk, or experience that informs the article.  In short, they're not an expert.  I think that's the first step that almost nobody takes: define an investment expert, and stop listening to those who don't match the definition.

yes, absolutely consider the motivations and qualifications of the person making the claim.
But... the track records for bona-fide 'experts' in predictive forecasting of the markets remains abysmal. Even the most experienced, financially educated and institutionally endowed financial experts (as a group) aren't able to predict where the market will be several months in advance.  That's not a knock on their intelligence or ability, but an acknowledgment that markets are chaotic and inherently subject to external, quasi-random factors.

The problem with sorting experts by their forecasting records is that randomness can look like a pattern. For example in four coin tosses, heads/heads/heads/heads is exactly as probable as heads/tails/heads/tails but it can fool the pattern-seeking function of our brains into thinking there is a pattern. Then the narrative function of our brain develops an explanation that there's something about this coin which causes it to roll heads each time.

Similarly, out of 1,000 experts and pundits, you are bound to find some whose calls were right/right/right/right simply by chance alone. It's theoretically possible some of these experts have skill, but it is impossible to separate them from those who got their outcomes by luck.   

[MustacheAndaHalf]

The article which motivated this thread was written by a reporter.  Not someone in the investment industry, but someone who profits when more people read their article.  They don't have a reputation at risk, or experience that informs the article.  In short, they're not an expert.  I think that's the first step that almost nobody takes: define an investment expert, and stop listening to those who don't match the definition.

yes, absolutely consider the motivations and qualifications of the person making the claim.
But... the track records for bona-fide 'experts' in predictive forecasting of the markets remains abysmal. Even the most experienced, financially educated and institutionally endowed financial experts (as a group) aren't able to predict where the market will be several months in advance.  That's not a knock on their intelligence or ability, but an acknowledgment that markets are chaotic and inherently subject to external, quasi-random factors.

Sometimes experts are in agreement but the market differs.  The best example for me was March 9-13, where the market was oblivious to how quickly Covid-19 could spread.  Did the experts predict the exact market drop or the number of deaths correctly?  No.  But the market only fell -7%, and then recovered half of that on Mar 10 2020 ... it was very clear the market was headed far lower under the impact of Covid-19.

In a video by an economist (earlier in this thread), they mentioned that annual inflation consists of dropping the oldest month and adding the most recent month.  I have very high confidence an assertion like that is correct, when made by an economist.  The question becomes if this is priced into the market, and if the general public's perception of CPI-U will matter.

I took a 2 month break from active investing, so I don't know the market views right now.  I don't know if many professional investors are making predictions that contradict that information - that could be a way to profit.  If something is certain, but the market assigns it a 50% chance, that gap represents a chance to invest and wait for the market to catch on.

This is also an election year.  Republicans will blame President Biden for inflation, which in turn means they will cite inflation numbers.  That plus the media discussing both sides will probably broadcast CPI-U rather broadly.  So the awareness of CPI inflation is probably going to rapidly increase.  What will happen?

I think people will see 8% inflation and use that to negotiate higher wages.  This is also a bias of mine - I'm looking for a "wage price spiral", which sometimes shows up during periods of high inflation.  I could be wrong.  But if I'm right, this could feed into higher inflation... wages go up... businesses raise prices to cover wages ... more inflation ... so wages go up.  I haven't checked the level of raises recently, but when I get back to active investing I plan to do more research on that.

So that's how I view experts - as providing information that may or may not be priced into the market.  In theory, everything should be priced in.  In practice, it isn't.  Remember last December, when the Fed claimed there would be a single 0.25% rate hike in 2022?  With inflation at 7%, that was nonsense, but the market believed it.