Sunday, June 7, 2009



The Washington Post has an interesting book review “The Myth of the Rational Market: A History of Risk, Reward, and Delusion on Wall Street”

The reviewer, Roger Lowenstein, states:

"The power of the doctrine was its grand design: the comforting notion that the financial universe adhered to absolute laws. But that was also its flaw. Prices couldn't be wrong; if they were, someone would seek to profit from the error and correct it. The illustrative joke was of two economists who spot a $10 bill on the ground. One stoops to pick it up, whereupon the other interjects, "Don't. If it were really $10, it wouldn't be there anymore."

Theorists such as Eugene Fama decreed that if prices are unforeseeable, then the future direction of the market is random. And if the market is truly random, prices should follow what mathematicians call a bell-curve distribution. In nature, this works. We don't know whether your neighbor will be tall or short, but we can predict, with pretty close approximation, how many very tall people will live in your town. In nature, extreme results such as a village of seven-footers will never occur."

Yale professor Robert Shiller that the efficient markets theory “represents one of the most remarkable errors in the history of economic thought.”

While Wall Street may be now questioned, farm milk price, originating at the CME, is still promoted as correct and near divine in its pronouncements.

1 comment:

  1. As the great Lorax once spoke for the Truffula trees...
    I will now speak for the dairy cows, so listen up if you please...

    My foremothers traveled with you here from far away lands, walked with your grandfathers through wilderness and across desert sands.
    They nourished your children and helped them grow strong, togther you made a great country and it didn't take long.
    Eating grass in the sunshine from spring until fall, spending the winter in a cozy barn stall... Prized possessions you had and held us in high esteem.
    But not long ago things changed, at least so it seems... You started to ask more of us, as dutiful servants of man.
    So listen we did, and now produce as much as we can.
    Most all of us stand at a feed bunk with no grass to chew, putting more milk in the tank, for the chosen few.
    We once would stay in the herd upwards of a decade or so, but now in just a few short years off to the packing house we go. We give the ultimate sacrifice for people everywhere, giving our milk, meat, hide and our hair.
    Now almost as if your countrymen have gone mad and blind, they no longer seem to value me and my kind.
    Our caretakers may be worse off than peasants of past, with bills piling up very high and very fast.
    The feed needed by us and our daughters they no longer can afford, the vet and the hoof trimmer come to our aid ever less and sometimes no more; because what they pay for all that we give, doesn't even allow us enough to live.
    Distressed, I sent out word, to all the cows in every herd throughout this great land, and asked; what have we done to become such a scourge to our foster child man?
    It wasn't long and an answer I had, it's not me, my sisters, or caretakers that are bad.
    We are at the mercy of a system you see, one that doesn't work and brings over too much from my cousins overseas. With so many hungry on this earth, how can making good food be such a hurt?
    But in the name of "profit" they keep us down trodden, traitors they are, and our downfall they are a plotting.
    Soon our numbers will be too few to feed all that we have, and this will surely make these world traitors very glad.
    Forever keep in mind these words the dairy cows told you today and pray to God that my caretakers and I never go away. For all the dairy cows in this country I speak; a land that cannot feed itself can never be free, wake up U.S.A. and take care of my sisters and me.

    Jeff Suehring