Past Performance is no Guarantee of Future Performance

The SEC has for many years required a disclaimer in forward looking statements to the effect that the past might not repeat itself. Tell that to all the folks that built statistical models for a better investing instrument. Ooops. Guess that did not work out too well. History, for the past couple of years, truly did not predict the future or even come close. Go figure - the SEC was right.

The truth is that the modeling does not predict or even account for the extreme tails. A tail is the very end on the curve that exists at both ends but for some reason models do not predict life at either extreme. We have just been through a very very fat tail, which is apparently something none of the models would ever predict. Indeed, over the past year we have had several sceanarios that many mathematical models out there would consider once-in-a-billion years or so events. Either the models were wrong or, perhaps, real life is not quite what the models predict. Let me think about that one for a while.

Sometimes history does not repeat itself. Sometimes, it throws us a curve.

http://deadcatsbouncing.blogspot.com/2009/07/market-timing-beats-diversification-as.html

Meredith Seeing Green Shoots

Now it is hard to be negative when others are becoming cheerleaders. It was easy for me last year when the market was proving going south and everyone started to gradually sing a negative tune. Gradually, this year, the chorus has turned positive, the market has had a nice bounce and, now, even Meredith Whitney thinks all is doing well.

http://www.nakedcapitalism.com/2009/07/is-meredith-whitney-bullish-now.html

I personally would love to sound a positive note but I am focused on fundamentals that are just not there yet. Perhaps I am looking at the wrong fundamentals. I will be the first to admit I do not understand micro-economic stuff; I am a macro guy all the way. On the macro environment, I do not see any economic mojo happenning right now.

Disclosures: None.