I’ve ranted about this before, but just as always happens when any high profile event is on everyone’s radar, the analysts are out in force ushering in a statistical amateur hour.
The next bank that ups their “probability of a Greek default” DEFCON status or “chance of Greece leaving the euro” headline should have to endure a run on their reserves of epic proportions. I want Citigroups’s end of day balance to go to -$250MM for daring to front such nonsense today, telling me that Greece has a 50/50 chance of bucking the EU.
How did they measure that? Maybe they used that awesome history they have of all the other times that Greece has left the EU? Or perhaps they counted the faces of dishonest Greek finance ministers against honest ones, and came up with a more classical probability?
This is nuts. Nobody knows for sure what is going to happen, so these guys are trying to disguise that by dropping a guess. But the guess is meaningless, because either Greece eventually leaves, or it doesn’t.
Rather than hiding behind these numbers, which I know are being pulled out of thin air, these commentators should just take a chance, venture a guess about how things ultimately play out, and put their reputation on the table. Or stop throwing out indeterminable numbers parading as science. Either one, really.
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Lol, I was thinking the same thing this morning after reading the headline.
Judging by how flawed models for predicting earnings and economic trends can be, one has to assume these are of far lesser quality.
But it’s not all by the numbers. All those people calling for a Lehman like event this year have put their reputation on the table. Which will be forgotten once their next prediction comes out. It’s the analysts way. Go all in on every prediction until you nail one and then live off that reputation.
Exactly. We should almost start an archive of complete history of analysts predictions. That way we have all the failed predictions, by individual, at the stroke of a key.
There’s a business idea in there. Subscription service to a database that holds all sell side analysts track records.
I’d keep a public ranking of the worst performers by industry. Call it the “dirty dozen.”
I wonder what the over/under would be on how many days before some kind of cease and desist letter lands on your doorstep?
4
i dont know how greece ever got into the euro in the first place. but they have been screwin around for at least 2yrs. i guess what ever happens to greece they look to other countries to follow suit.
You’re right, this isn’t like 50% chance of rain tomorrow.
If you have the opportunity, read “The Flaw of Averages”. Quite a variety of situations (like this one) are not well characterized by probabilities, but we still like to have a number, however meaningless.
If someone believes Greece will not leave the EU, I’d really like to hear their rationale.
A Game Mr. Thaler