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Comment by steveBK123 | Hacker News Reader

Morgan Housel is a good read in terms of personal finance / behavioral finance kind of stuff.

Being inside the industry, I can say this is a very accurate observation:

> If asked, “Why did the stock market fall 0.23% last week?” an average person will shrug their shoulders and walk away. A very smart person will show you their yield-curve model and valuation analysis and tell you whether the performance will continue. Who do you think is more likely to be stricken by overconfidence?

Remember this anytime you watch CNBC & the like.. they can describe in hindsight the WHAT, but the WHY is generally made up on the fly. A classic smart sounding but meaningless joke answer to the above question is "More sellers than buyers". A lot of financial media is basically this.

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> Remember this anytime you watch CNBC & the like.. they can describe in hindsight the WHAT, but the WHY is generally made up on the fly. A classic smart sounding but meaningless joke answer to the above question is "More sellers than buyers". A lot of financial media is basically this.

There's a much broader topic behind this called Rationalization [1]. I won't forget the sentence by a professor of psychology that said: People are not rational. They are rationalizing.

For me, it took a while to sink in but now I do not focus too much on explanations anymore as these are anyways afterthoughts of intransparent internal processes. However, I pay more attention to how people act.

Interestingly, all this is also some kind of rationalization that my mind made up. But how can I be in control of the inner workings of my brain anyways...

[1] https://en.wikipedia.org/wiki/Rationalization_(psychology)

In a similar vein, Gary Stevenson (UK economist & trader) also does an excellent job of confirming (and explaining) this. He has a new book out, the Trading Game that's well worth a read (excerpt here: https://nymag.com/intelligencer/article/london-finance-the-t...)

Already at top of my reading list, good call!

Always nice for CNBC guests when they get to financial-splain industry terms to the audience, but when they’re asked for predictions they suddenly lose their tongues.

“What will the market do?” “Well, it will fluctuate.” <-- great answer if you can get away with it

> Being inside the industry, I can say this is a very accurate observation:

I would say it’s an inaccurate observation, since a smart person would know that using a couple macroeconomic measures cannot explain short term changes in prices.

I think its more like the mid twit meme.

The idiots & geniuses would respond "I dunno, it's complicated".

The big middle reasonably high IQ "smart person" will ascribe causation based on what they are most familiar with.

Macro guy will point at rates, fundamental guy will point to some specific earnings season themes, quant guy will be like "momentum meltdown", sell side desk guys will have some flows explanation, etc.

The answer is really some unknowable combination of "all of the above".

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