Why Are We Such Suckers For Prediction?

It doesn't matter what news source is your "go to" they tons of insane, and often, wrong market analysis...so why do we still watch? In this article Charles Maley from ViewPointsofaCommodityTrader.com takes a stab at digging into our psyche...enjoy the article!


I keep CNBC on all day while I work. Perhaps I think I will miss something, or maybe it’s the background noise that’s appealing. In any event, what I always find amazing is the parade of experts making one prediction after another. I think I would fall out of my chair if I heard one of them say “Well, to tell you the truth Mark, I have no idea”.

What’s most surprising is the arrogance in which these forecasts are made. The forecaster always seems convinced he is right. I think the world is far more complicated than we think, yet we always seem to place way more value in what we know over what we don’t know. If you are an auto mechanic, you most likely know more about fixing cars than you don’t know about fixing cars. Also, errors are easily rectified. In this light, a good mechanic is an expert.

If you are a psychologist or an economist, I don’t think so. In fact, it’s practically impossible that your knowledge of the human condition would exceed your lack of knowledge of the human condition. Not to mention that mistakes can be catastrophic in these “big system” type professions. Plumbers don’t kill people but doctors do. Mistakes when predicting the weather, the economy, or the financial markets can and do ruin our lives. Nothing is as potentially dangerous as a rational prediction in an irrational world. So, are there really experts in these professions or are they just the one-eyed men in the land of the blind? I Guess Yogi Berra, the great baseball player/coach had it nailed when he said “It is tough to make predictions, especially about the future.”

I think we love predictions because if we make predictions, and/or concoct explanations for those events we predicted wrong, then we won’t feel like victims of randomness. We feel more in control. But are we more in control or just intoxicated by some illusion of control?

In his book “The Black Swan” Nassim Taleb says,” We have seen how good we are at narrating backwards, at inventing stories that convince us we understand the past. In spite of the empirical record we continue to project into the future as if we were good at it, using tools and methods that exclude the rare events.” Funny isn’t it, since the big, rare, unpredictable events are precisely what shape the world. Events like the automobile and the World Wars, the internet and the Beatles.

I think it’s ironic that by accepting we have little control over most things, actually gives us greater control over what might happen. By realizing our lack of control we may be able to minimize the more negative events. If we realize anything can happen when trading commodities, then we are more likely to actively manage our exposures to big loss and potential ruin.

Charles Maley
Charles has been in the financial arena since 1980. Charles is a Partner of Angus Jackson Partners, Inc. where he is currently building a track record trading the concepts that has taken thirty years to learn. He uses multiple trading systems to trade over 65 markets with multiple risk management strategies. More importantly he manages the programs in the “Real World”, adjusting for the surprises of inevitable change and random events. Charles keeps a Blog on the concepts, observations, and intuitions that can help all traders become better traders.

13 thoughts on “Why Are We Such Suckers For Prediction?

  1. Thanks Erik for the kind words.

    Yes, I am very familiar with Robert Prechter. In fact I have been keeping an eye on what he is thinking since his days as a technical analysis at Merrill Lynch.

    The point I was trying to make in the article was not necessarily that people can't predict things, as much as it was that in certain fields it is way more difficult to predict. As I pointed out, I think it is way harder for the economist than the auto mechanic.

    Prechter’s forecast (at least what I have seen) on such things as dress styles and social changes have actually been more accurate than his forecast on the markets. I don't know if you have read either “At The Crest of The Tidal Wave” or Conquer The Crash but "crest" was copy right in 1995 and conquer in 2002.

    I think we might be seeing what he was "predicting" then as more of a reality now, some 15 years later. This is no reflection on Prechter as much as it is on the difficulty in predicting extreme dynamic “big systems" like the economy or the weather.

    On a bright note, like I point out in another article, you don't have to be right often in trading. Like the treasure hunter, being right once can make you a lot of money. I think the key is to keep your “Wrongs” small.

    Thanks again I am glad you might be able to take something from the article………. and I am thankful for the feedback


    Charles Maley
    http://www.viewpointsofacommoditytrader.com -Visit My Blog

  2. CNBC is pure economic propaganda! The only reason to have it on is for the ticker and Erin Burnet :~) Otherwise, Larry, Michelle and Dennis are worthless mouth pieces.

  3. I watch CNBC as well as BNN The only problem I have with both of them is the in burning of the ticker tape to the screen, on my plasma TV. Therefore I watch them both sparingly.

  4. Mr. Maley,

    Excellent article and I'm in agreement except on one point. You
    are no doubt familiar with Mr. Robert Prechter the analyst and
    Elliott Wave authority. He feels historic events like wars, movie
    and music preference cycles, as well as dress styles are predictable
    based on the 'moods' of the masses which actually predate the events
    in the markets and the world. I find the theory of Elliott Wave
    fascinating and suggest that anyone who hasn't pick up some of the
    literature on it, or check out elliotwave.com.

    Thank you for your informative article.

    Erick T.
    Chicago, Illinois

  5. I watch CNBC for the tickers and eye candy. 99.9% of the rest is blather.
    Too many hosts, the worst offenders being Dennis and Michele, just LOVE to talk over a guest's answer. Also, I don't think these GE employees are interested in hearing "lousy" forecasts. Even Larry Kudlow has turned into a "Howling Hyena"! "Tis sad.

  6. We want to predict the markets because, if we predict well, we'll make money. It's that simple. Even the use of 'trade triangles' is at base, an attempt to predict the markets.

  7. As unusual as this might sound, I do not have TV in my life...at all!...
    so I am not distracted by it. Since I began trading in April'08, I have been mentored to avoid CNBC or any other such market noise.

    BUT.....a source of noise HAS crept into my awareness: emails! They spouse just about everything that CNBC doesn't. Software, trading systems, trade alert services, trader's education, etc. This stuff just might be more distracting than news. For sure, it is more costly--both financially, and time.

    Gawd, the time increase in email management is huge! To get it under control I created a private email account strictly kept free of mailing lists, and devoted to trading. Now, when I make a trading-related inquiry to an online business, I use my "shopping" address. It works like flypaper! (grin). Unsolicited mail lands in my spam box and I just empty it without a look. Very effective method.

    1. Sir,

      I was starting to believe I was the only person in the world that had never bought or owned his own TV. And this weekend I meet two people, including yourself of like mind. Who would have predicted that?

      Everyone else it seems believe we miss so much by not having one. Truth is that the space where the TV would be acts rather like your email filter except everything goes in to the spam box.

      Thank you for making me feel 'normal'. My friends don't think I am.

      1. Me too. No TV. When I recently looked TV fare in a hotel room I was shocked (I think that's the right word) at the banality, the hype and the patronizing mentality of the advertising and most of the shows. There are good shows (thoughtful scripts, excellent acting & informative documentaries) on TV. But these are small nuggets in a shipload of disgusting demeaning dreck. I'll get House and a few other shows on DVD and watch em later, without the ads.

        I read (glance at, rather) Bloomberg and other news sources, but I don't trust them a great deal either, especially when they "report" that the recession is over (or that its not over yet) Who cares? It's all just guessing anyway.

  8. Rick Aristottle Munariz of the Motley Fools is paid to mislead investors about Sirius XM Radio. He is part of a news media collusion lead by CNBC and their own Jim Cramer. Jim Cramer's street.com web site is also hip deep into the collusion. Jim Cramer and his writers, especially Scott Moritz are all part of the scandal and it leads upward to CNBC/GE executives and Goldman Sachs. Thank god their is now an investigation taking place with Goldman Sachs. Goldman Sachs was investigated and 10 firms, including Goldman Sachs were fined $1.4 Billion dollars in 2003. Now the full blown investigation by Boston's Chief Financial Regulator William Galvin will reveal the corruption of Goldman Sachs again and I can only hope that William Galvin will follow the money trail and check the bank accounts of Rick Aristottle Munariz of the Motley Fools along with Scott Moritz of the Street.com Just check these 2 writers banking accounts and the investigation will reveal that they are being paid off to write mis-leading stories about Sirius XM Radio. The money trail from these 2 writers will lead to >>> Motley Fools >>> Street.com >>> Jim Cramer >>> CNBC >>> GE / CNBC executives >>> NAB >>> Goldman Sachs.
    It has all been a news media collusion along with the combination of Wall Street corruption by Goldman Sachs to destroy Sirius XM Radio inc. by naked short selling, flash trading, superfast computers, using secret software to manipulate the Sirius XM Stock price in decimal places the past few years since the Siri /XM merger was announce in Jan 2007. It was a pact agreed to by the news media and Goldman Sachs, which is why CNBC keeps reporting positive story after positive story about Goldman Sachs. All are into this collusion knee deep and this is why they will not report Goldman Sachs and their biggest scandal in the history of Wall Street.
    Goldman Sachs got greedy. The scandal with Sirius XM Radio, worked so well with their secret software that was making them millions of dollars a day. Well, their Greed expanded into not just naked shorting & decimal place trading Sirius XM radio, but Goldman Sachs, next said , heck this secret software works so well, along with CNBC's cover up lets do it to our competition the banking industry. Goldman Sachs next used these tactics on the banking industry in 2008 - 2009. They have been protected by CNBC by paying CNBC millions of dollars a month in advertising or shall we say paid protection.
    Goldman Sachs greed almost ruined this country when they began using naked shorting and their secret software to attack the banks. It was their Greed of making millions using this software attacking Sirius XM Radio and when they expanded their scandal to the banking industry, they were now making over $100 million dollars a day. This is a fact, as Goldman Sachs made over $100 million dollars a day in 46 of 64 trading days last Quarter 2009 ( April , May, June 2009 ).
    CNBC is part of the scandal, taking in million a months from Goldman Sachs for their silence. Why wouldn't Goldman Sachs pay CNBC millions of month, that was nothing to them, since they are making over $100 million dollars a day. They helped CNBC try to ruin the competition ( Siri ) and now CNBC will help them ruin the other Banks. A true partnership by Goldman Sachs & CNBC.
    The scandal lives on today, but thankfully the investigation by William Galvin will be expanded into the news media collusion of CNBC, Motley Fools & Street.com along with many other news media types.
    Their Greed and goals have cost the average investors of the World hundreds of billions of dollars the past few years. In the end the truth is going to come out, but how does the people of the World hear the truth when the news media is part of the Scandal.
    Well, a few years ago, CNBC & Goldman Sachs would have gotten away with it, but thank you http://www.Satwaves.com , http://www.twitter.com/stockshockmovie and the many social media outlets and bloggers out there. Thank you for helping bring the truth to the World. Each day we get closer and closer to the biggest scandal in the history of the United States. ( Written by Richard Keane – August 30th, 2009 )

Comments are closed.