My Failed Inflation Prediction

In August 2009 I made some tongue-in-cheek type predictions. To be clear, I roughly believed them but at the same time I knew they were some gut feelings based on some rough models I had in my head.

My inflation prediction was that that CPI would hit 250 by Fall 2011. It was about 215 at the time which put inflation to be close 8% a year. Apparently we're still not there.

Correlation as a Substitute for Critical Thinking in Finance?

I frequently come across graphs like these on various blogs and articles. I'm going to single out one, not because there is anything particularly wrong about it (they're all wrong), but only to use it for illustrative purposes. I could really pick out any of these and offer the same criticisms.

This one I found in the article The Declining Inflation Expectations Chart That Should Have Stock Investors Very Concerned. The original chart apparently come from Dan Greenhaus via twitter.

Interesting Approach to Predicting Future Stock Returns

So Jesse Livermore (the name on his twitter account, which comes from the trader who is known for his Reminiscences of a Stock Market Operator) has an interesting blog called Philosophical Economics. Under discussion today is an interesting approach to predicting future stock returns. The blog post under question is entitled The Single Greatest Predictor of Future Stock Returns.

In what follows I'll offer a brief summary of the post (he writes longer blog posts than I do!) and a few points of criticism as well. The criticisms offered, I think, will be in the spirit of Jesse Livermore's criticisms of other metrics which attempt to predict future returns (see here).

2013: Year in Review

So I started this blog several years ago and didn't do much with it. I picked it up again in 2012. 2013 was the first year I blogged the entire year.

Starting out this was primarily a philosophy blog. I still think of it as such but I've devoted several thousand words to finance as well. My guess is that most of my readers (you know, the three of you . . . well one since two of you are just voices in my head) are more interested in finance than philosophy but I think there's a lot of value that can be gained from philosophy.¹ You'll find a good number of my finance posts are still related to methodological questions.

Exploring Operational Definitions: Part I

An operational definition is a way to define a concept by the set of operations or procedures which are used to make a judgement with that concept. This idea, along with a philosophical thesis on meaning known as operationalism, was popularized by Percey Bridgman (see his The Logic of Modern Physics).

One example he liked to use is the concept of distance.

More on Benjamin Graham and Uncertainty

So in Uncertainty and the Margin of Safety, I suggested that an important concept in physics ought to be applied to investment analysis (and economics for that matter). Furthermore, I suggested that Benjamin Graham's concept of "margin of safety" was linked with this idea of uncertainty.

Today I want to take a closer look at the sorts of uncertainties faced in investment analysis and how Benjamin Graham recommend one face those uncertainties.

Stock Valuation and Anchoring: AF2P Contest Results

Thanks to everyone that participated in my little study. I'm going to outline what questions I wanted to answer with this study. Hopefully, you will find this information useful.

Introduction

As investors, we're trying to find good companies trading at a good price. But how do we assess what to pay? Obviously there is a good deal we don't know; we must make decisions under conditions of uncertainty.

Enter the AF2P Stock Valuation Contest!

So we're having a little stock valuation contest. It shouldn't take you too long and you have a chance to win \$25. You'll be helping me out in a little research project I have so I'd appreciate it if you would sign up and participate.

Click here for details:

AF2P Stock Valuation Contest

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