2012-12-26 06:05:55 -
/EINPresswire.com/ A leading economist has said that the stock market is failing to communicate accurate information about the economy, and this is opening the door for sports trading to become a more reliable alternative for investors who are fed-up with being treated with contempt.
Forget the stock and futures market, there is more truth and transparency in sports trading, according to one of the world’s leading economists.
Peter B. Kenen, a leading international economist and an expert on the Eurozone, in his last media interview earlier this month, said that sports trading is the way of the future.
“The stock market is seriously contemptuous of investors, whereas there is a truth and transparency to sports trading,” said Professor Kenen, the Walker Professor of
Economics and International Finance Emeritus at Princeton University, who taught at Princeton from 1971 until 2004, and continued to teach part-time until 2011.
“The bullish analysts are slobbering all over themselves. But the volume doesn't really reveal the quality of the stock market, which to my mind ought to be awful,” he said.
Professor Kenen concedes that the stock market is under no moral obligation to perform in the manner we expect.
“It would be nice if it did. But investors have always thought this way. This is why the stock market is so good at humiliating the over confident and humbling the proud. Prices are what they are, no matter what you think they should be,” he said.
Professor Kenen predicts prices will eventually go lower, citing that two of the world's three largest economies - the United States and Europe - are on the verge of another recession. But he says that is just a textbook definition. The reality is much worse.
“The reality is that consumption in both economies is likely to remain low for years, as households deleverage. To the Keynesians, consumption (aggregate demand) is what drives GDP. If you want GDP to stop falling, you have to make up for the 'lack of consumer demand' by spending more at the government level. This textbook solution is complicated by the fact that most governments are already deeply in debt,” he said.
“When you take an individual and give him a decision to make, he usually makes it calmly, sensibly, and soberly,” Professor Kenen said.
“That's not to say he gets it right, or doesn't fall prey to fits of madness and irrationality. But a sane man on his own isn't prone to doing crazy things.”
This he says proves a point understood years ago by the French psychologist Gustave le Bon.
“Take that same sane man and put him in a crowd and all bets are off. Collective decision making takes on the same characteristics as the mob. It's guttural, animal, and visceral. A person loses his sense of self in a crowd. The crowd becomes a living, dangerous thing that causes us to do things we'd never otherwise do.”
He says that this is what has happened to investors in the stock market in the last three years. They have ceased to be individuals. The stock market is now a crowded one-way momentum play, which is not a market at all. It's a fix, he claims.
“In a real market, you have a diversity of ideas about what companies are worth. Some investors are value investors. They believe that a business has an intrinsic value and you can apply a discount rate to its annual cash flow, identify a required rate of return, look at the return on equity, and then pick the best company and get the best price.”
“The technical traders and the quants look at the internals of the stock market. They look at volume, liquidity, moving averages, and relative strength. They're neutral on what the stock market ought to do. They speak in the language of trends and maths and charts.”
“But we are all slaves to Bernanke now, and he has obliterated the differences between us. When you get the whole stock market hanging on every word the central bank utters, when prices become derivative of policy, it's not a stock market anymore. It's a crowd.”
“The crowd reacts to the magician on the stage. The magician on the stage is a fraud. But he's a fraud with tremendous powers of misdirection and deception. And he can keep the audience in thrall longer than you can remain solvent betting against him.”
“This, anyway, is how we explain to ourselves why the stock market is not doing what we think it should. But you'd only deceive yourself by thinking this way if you left it there. What really matters is what you're going to do with your money. And we reckon it's possible to recognise the stock market and look towards sports trading as a better alternative.”
“Sports betting is much easier to manage because most of the variables and information are publicly available and all you have to do is analyse everything to find the edge,” he said.
“Stock market on the other hand is more complex--monitoring the performance of companies is much harder than monitoring sports teams. There are too many unknown variables in the stock market that could affect the performance of your stocks. Often, these variables are not available to the public immediately and because of this it is really difficult to gain an edge unless you are an insider in the company or stock market. Insider trading is illegal but it is much more common than match fixing in sports betting.”
“The key is for investors to align themselves with experts and professional analysts,” he said. “The recent success of the Sports Trading Club is a clear example of how the amateur investor can prosper and out perform any hedge fund.”
“I believe you will see sports trading funds become a very real alternative to traditional investment markets in the years ahead,” Professor Kenen said. “It just makes good sense.”
PR Courtesy of Online PR Media