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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: mishedlo who wrote (106636)	1/17/2010 2:58:01 PM
From: Unalakleet	3 Recommendations Read Replies (5) \| Respond to of 116555

Okay, that was the best post of the year (about this conspiracy business) as far as I'm concerned. Smart people in economics is an oxymoron. John Mauldin wrote an article in Economics Magazine last year about speaking at a hedge fund conference in 2004 or so. He was just a minor speaker. The Big Cahuna was the great mathematician and economics professor Harry Markowitz, the guy who came up with the famous formula that we should all invest in 60% stocks and 40% bonds and stocks held for the long term will outperform bonds easily (Modern Portfolio Theory). Harry Markowitz is a guy who knew calculus at age 8 or 9. To say he is smart is like saying Mount Everest is tall. John Mauldin was greatly concerned about the economy and confronted Markowitz in the hotel lobby or some place. Mauldin said that Markowitz tried to ease his troubled soul by doing a quadratic equation in the air. He did the equations backwards so that Mauldin could read it right to left. Get that? This Markowitz guy is doing complex equations in the air backwards. Yet bonds have outperformed stocks for the past 40 years. Is Markowitz part of the international conspiracy? Or did he make a mistake in all his brilliance? The latter is infinitely more likely. Mauldin concludes, "Modern financial theory only works in models if you assume a few things that are patently not true in the real world."