Friday, August 21, 2015
The Chinese Stock Market Crash is it because of "The Invisible Hand"
“A former hedge fund manager, MBA prof & expert witness on investments” writes HERE http://www.quora.com/The-Chinese-Stock-Market-Crash-is-it-because-of-The-Invisible-Hand
“The short answer is that the invisible hand not only caused the stock market crash, but that, when the market is working properly, the invisible hand causes EVERY crash... along with every change in stock market prices. The basic thesis of the invisible hand, as coined by Adam Smith, is that markets of all kinds (stocks, groceries, energy) further the common good by incentivizing people to deliver goods and services that society wants. Assuming the market is operating rationally, the hand has caused this crash by pulling capital out of the market, having determined that the future goods and services sold by companies in this market will not have the profits previously expected (although there is also the possibility that investments elsewhere have become more desirable).”
The “invisible hand” was never a thesis “coined” by Adam Smith.
Long before Adam Smith was born the “invisible hand” was used regularly in the 17th century - and before then too. It was used by Smith ONLY three times - twice without reference to markets and the third time as a metaphor for domestic capital investment arithmetically adding to what we now call GNP.
Markets do not operate “rationally”. They are operated by human beings and like governments, also operated by human beings, they make many mistakes and misjudgements, including by people who quite “rationallly” act for selfish purposes closer to failure and often criminality than to the benefit of other people. The future ifsnot “determined”, nor known, and people in futures markets are no better than gamblers making guesses, much like tipsters in the horse racing business, usually with other people's money.
Tuesday, August 18, 2015
MONEY AND EXPERIENCE
“Joann” on Easy Blog posts a Blurb (Feb 15 2014) from the respected publisher, Wiley HERE http://www.lannexe-divonne.com/component/easyblog/entry/the-invisible-hands-top-hedge-fund-traders-on-bubbles-crashes-and-real-money-download-61.html?Itemid=101
“The Invisible Hands: Top Hedge Fund Traders on Bubbles, Crashes, and Real Money” by Steven Drobny.
“Smith postulated it is the magic of the invisible hand of a free market that best distributes economic resources and best energizes the people and industry and innovation. Feb 10, 2014: In his preface to the new edition of The Invisible Hands: Top Hedge Fund Traders on Bubbles, Crashes, and Real Money (Wiley, 2014) Steven Drobny.
Of course there is always a market in selling books, and ‘confidential insiders’ newsletters from those claiming to be in “the know because of their experience”. The old wisdom postulates that a “man with money meets a man with experience. The man with experience ends up with the money, while the man with the money ends up with the experience”.
A load of gibberish inventively misquoting Adam Smith is no guide to making a fortune listening to "insiders".
Smith never referred to the “magic of the invisible hand”, nor that there was an “invisible hand of the free market”, and not even that it “best energizes the people and industry and innovation”. These three claims are utterly untrue, though widely believed.
My new essay: “Adam Smith on Self Betterment, the Invisible-Hand, Human Actions, intended and Unintended Consequences”, addresses exactly what Smith said about his use of the "invisible hand" metaphor. It should be available shortly after September/ October.
Tuesday, August 11, 2015
LOONY TUNES NO. 120
Oscar Williams-Grut posts on Business Insider (3 Aug)
The second phenomenon is the insane level of government intervention in the markets. Here's Sweeney: "In China a very visible heel can stomp on the invisible hand of financial markets.”
Chance Kinnet posts (11 August) on ChipChick: HERE
“Is HTC About To Go Bust?”
“Essentially, it’s the invisible hand of the free market becoming visible just long enough to give HTC the finger.”
Nerd Wallet posts on Nasdaq (10 August) HERE
“None of this is intended to disparage fee-only planning. Rather, my aim is to dispel the notion that any compensation model is morally and ethically superior and to encourage you to keep in mind the presence of Adam Smith’s “invisible hand” when evaluating various advisor compensation models.”
CommentEssentially each of these loony posts have something in common. They refer to the alleged presence in markets of a supposed invisible entity that for certain purposes can become visible to people.
1. How does the Chinese "very visible hand of the state" know where to "stomp" an entity that is invisible?
2. How does an invisible hand become visible long enough to be seen?
3. How does an investor "keep in mind" something invisible when "evaluating" compensation models?
Conclusion: their advice is inoperable and a waste of money paying for it.
Saturday, August 01, 2015
LOONY TUNES NO. 119
“Nannus” posts (12 July) on “Embassy of the Future” HERE
“Being Strangeled by the Invisible Hand”
“Earsto1” posts (22 July) HERE ““Your Invisible Hand”
“A message for all future and current Big West soccer players.
When playing soccer, make sure to never use your invisible hand that grows out your left rib, because you will be called for handball.”
Tim Watter posts (1 August) on Reddit HERE
“The "Invisible Hand" Of The Market Is Slapping The Poor Into Senselessness”
To which a comment is added by a reader:
“The invisible hand of corporate fascism slapping the market into senselessness, actually.”