Paul the Humble Octopus

Earlier this week, a Bank upgraded a company that even a normal person had no confidence in. Stock price rose - even when results clearly showed that it's not doing too healthily. And then Asian market was bearish on most mornings before it goes on to become bullish by the time market closes. You ask a person and if they go "US will not default for sure!", markets rally up. "Well anything is possible. Not impossible for US to default", and market would plunge.

Made me think, to be working as an analyst/trader, you've got to have the skills to analyze well and make a call that would potentially materialize. Also, to be able to get some sleep after making a "wrong' call. I've seen investors making decisions based on what the big firms suggest. Sometimes not even doing a background check on what they are investing in.

But who is to define what is wrong or correct? I’ve always believed that no one is right nor wrong. They’ve made a certain call because of their assumptions and no, nobody can predict the future accurately. That’s how we do valuation after all. There is nothing objective about stock prices really. In fact, it prices in the subjective value judgements of traders/analysts and no doubt these value judgements can change.

I’ve had friends who’ve come up to me and said “You bankers are liars and the ones who caused the financial crisis”. Whoa. Chill la dude. If you never believed in Bankers who run the Banks, then why don’t you put your money under the pillow and see it grow, hmm? Better still, hire Paul the Octopus as your private Banker. If we say buy also salah, sell also salah, how are we ever gonna be able to go to work? Seriously. No one forced you to invest or not, and has it never occured to you to read the disclaimer and terms and condition? There is such thing as risk. Market risk, credit risk, default risk, everything-risk. READ.

We’re humans, we can predict as best as we could given the information we have, that’s it. Whether you’re a trader, investor, analyst, lawyers, doctors, students or a guy who sleeps by the corridors…when it comes to the economic outlook, sometimes the answer to that is we simply don’t know.

And really, we should be rather more humble than we are about the limits of our knowledge :)