Sunday, March 15, 2015

Efficient Market Hypothesis

This is a perfect example of common perception inflated to economic theory. It tells you to wait in line and take what’s coming to you.  The fundamental fallacy is the belief that the game is fair.  The moment you start depending on the efficient market hypothesis, you find yourself joining a buying club, in a time-share; your stop loss positions wiped out in a flash crash and trapped in the slow lane behind a befuddled shrivel.

Do not confuse the efficient market hypothesis with the cost of investment decision paradox.  This is the famous cost accounting paradox predicated on the belief that the time spent on an investment decision should be tempered by the value of the expected gain.  Beloved of lazy accountants who refuse to get out their rulers and measure floor space, it leads to the off shoring of production facilities and the black hole of corporate Calcutta, where more and more employees are squished into cheaper and smaller offices.

When I go into the car dealership and ask for the cheapest one, I am not using the efficient market hypothesis or optimizing the cost of my decision.    I am giving up.  I know that the manufacturers have spent millions beating me on this game and I am overmatched.

Anytime I enter a tastefully decorated home, I shudder.  I know that with the slightest prompting they will inventory their purchasing victories.  Consider the enormous man-hours that went into that effort, counted as part of the cost they would have done far better to work extra jobs and hire a decorator.

-Oh but antiquing is my recreation.

Not to mention the cost of the vehicle necessary to lug those tasteful decorations home.

-Besides this gives me time with my family.

So multiply the time wasted by the family size.

-You just don’t love me

I have noticed that the proportion of goods manufactured for the resale market has steadily grown, as would be expected.

You should always check your eggs , ice cream and milk.

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