James Montier In Defense Of Mean Reversion, And Why Economist Predictions Are For Idiots

Tyler Durden's picture

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MeTarzanUjane's picture

Nassim Taleb, Rosenberg, etc... All produce economic predictions.

Now you endorse them all as idiots?

Is ZH dipping into too much eggnogs?

rocker's picture

ZH is Very Fine.  If you want real garbage try Prechter's EWave garbage predictions for 2010.  All Wrong. But he has ten books, twenty DVD's, and hours of newsletter garbage to sell you. He has a program for his every thought which only a ponzi scam could accomplish. He can sell you 100 ways to tell you what you already know.  The American Dream for most is over.  The most he talks about can not afford to buy his garbage.  Will You ?  I hope not.  ZH provides you with great knowledge.  You choose to use it or not.

VeloSpade's picture

Well, for someone who admonishes everything and anything on his website (that you are intimateley familiar with), we now know who Prechter's biggest fan is.....YOU.

jeez..f'n idiot.

snowball777's picture

Suck Prechter's cock, VeloGroid.

rocker's picture

+2  Thanks Snowball. I get his FREE newsletter. He is the ultimate contrary indicator. Bought his Shit once. Never Again.  Although, I know others who still pay homage to his Fear Selling Shit.  He keeps the "Rinse and Repeat" Alive. 

VeloSpade's picture

What's most revealing about you two winners is that through your own admission you read and/or follow Prechter even though you denounce him.  Hence both of you win the idiotic full fucking retard award (IFFRA).

Oh, I almost forgot, you can both suck my cock you fucking filthy faggots (FFF).

fuggetaboutit's picture

without a doubt the most idiotic part of any equity argument right now is the "hey if i just put 15x on whatever invented eps number i choose embedding euphoric consumption conditions and peak margins ad infinitem, well, hey, stocks are cheap"

leave the earnings side out of it for a sec, what do ppl think is going to happen to the rate at which earngins are capitalized when the levee finally breaks here and interest rates rip to where they would be if credit markets were left to debate things like black hole budget deficits and sky rocketing input costs without the constant application of morphine via money that doesnt exist printed and distributed by a man no one elected?

if ppl think multiples arent gonna come crashing down they are either nuts or work for goldman or both

fuggetaboutit's picture

not sure why that duped

hugovanderbubble's picture

James Montier is a good analyst.

thepigman's picture

Don't get too excited. I generally agree

with the guy. We got a huge one

time earnings boost laying everyone

off....care  to take a wild guess where the

10 year mean on earnings is? About


thepigman's picture

Point being...earnings are non linear...

they revert to the mean and the mean

is far lower than where we are now. And, there

is no one left to lay off.

Stuck on Zero's picture

Sometimes there is no "reversion to the mean".  For example, Cisco, Microsoft, Google, Apple etc. have no "mean" because they are new paradigms.  Housing is moved by demographics more than anything else.  No mean there.  Coal, steel, land, and utilities probably reflect a reversion to mean strategy.  Big money will be made by anticipating fads, however.  Fads drive everything way beyond any reasonable consideration.  In this case there will never be a reversion to the mean.  There will simply be a collapse after "irrational exuberance".  All in all "reversion to the mean" implies nothing more than watching for ridiculous deviations.

bronzie's picture

"Housing is moved by demographics more than anything else.  No mean there."

Two points I would make:

1. the current real estate market was a bubble that peaked in 05/06/07 - the real estate market was several deviations above any reasonable "norm" you care to choose - it is in the process of mean-reverting now and it is very likely to overshoot the mean to the downside

2. the Boomer generation was a bubble in the demographics curve and their is no comparable demographic group coming behind them - the assets that the Boomer need to sell (ie, real estate) will depress the markets because they will provide more supply than demand can absorb

A Nanny Moose's picture

Especially if deflation really takes hold.

jeff montanye's picture

check the dallas fed article on residential real estate coauthored by dimartino booth.  good chart of mean reversion in real estate indices from 1890 to 2010, reprinted last night or so on zh.

spinone's picture

Housing is moved by interest rates more than enything else, kiddo

hugolp's picture

I agree with what he is saying, but not all economists think like that.

thepigman's picture

The funny part is he's right just in time

to be wrong. The pendulum is already

swinging back toward Taleb, Rosie and


VeloSpade's picture

That "then/now" pic looks like a before and after pic of my breast implant, without the nipple.

Cheesy Bastard's picture

I hope you didn't go from "then" to "now" on the graph, though.

mynhair's picture


"But what does it mean for the way we invest?"

It means: Buy the fukking dip, u fukking idiot!

RobotTrader's picture

Exactly.  I learned my lesson the hard way back in 2003 and 2004.  Lost a fortune shorting a strong tape because I was listening to all the so-called "experts" and "gurus".

Now I trade like a Robot.

If it's going up, I buy it.

If it's going down, I sell it.

I have some simple methods I use to determine if the market is healthy or deteriorating.

Just follow the trend and you will be OK.

A heck of a lot easier than sports wagering, which is what 90% of my friends are into.  And these guys play with serious money....


Charlie's picture

So what would you buy at this point?

vas deferens's picture

Sports wagering is a good source of income if you can withstand the high veriance.  Sports wagering all you need is some math skills, your control (a sportsbook with correct odds) and sportsbooks with slow updates or allowing correlated wagering.

People wagering on there knowledge of the game will lose everything in the long run.

percolator's picture

I'll add it's a real grind and you need a serious bankroll.

ATG's picture

Only fools eschew the greater fool theory

Also propounded by Cherokee Indian Cowboy folk humorist Will Rogers in the 30s and 40s

Worked a sports book and watched most people lose while a few insiders skimmed

Not terribly different in the market

The house makes the rules

prophet's picture

"If it's going up, I buy it.

If it's going down, I sell it."

and all this time I thought making money was done by buying on the way down and selling on the way up.

Al Huxley's picture

Spot on.  We may be heading for inevitable disaster, but anybody who is in the markets in any way better learn how to follow the tape if they don't want to be donating funds to JPM and GS.

VeloSpade's picture

Does Lucca Brazzi really sleep with the fishes or is that just another conspiracy?

VeloSpade's picture

Did you really shit your pants when the Barzzini's strangled you?

spinone's picture

with no CNS activity, even your involuntary muscles relax.

Cheesy Bastard's picture

Still, he coulda shat just before he went into the bar. So the question still hangs in the air, did you shit your pants, Lucca?

Don Birnam's picture

One of Bruno Tattaglia's soldiers did Luca at the bar. Marone what a load they had to clean up.

VeloSpade's picture

Ah, so it was the Tattaglia's, not the Barzzini's... hmmn, well it was still a good choice to kill em all anyway.  RIP Lucca Brazzi.

Cdad's picture

Wow...this whole comment thread...an exercise in futility.  Some like this kind of thing, I guess...but as that last and brightest bulb on the globe goes dim...perhaps we could rise to greater purpose?

Just a suggestion...

Cheesy Bastard's picture

Sometimes, ya just gotta say "what the fuck".

VeloSpade's picture

Here is a suggestion worthy of your consideration:

Fuck you, eat shit, and die.

VeloSpade's picture

Oh, I almost forgot, buy the fucking dip too, dipshit.

Cdad's picture

Thank you, Hong Kong, for weighing in instantly.

There you are, folks.  The China effect.  And you thought it was just about China buying Europe all of  a sudden like.

Sweet.  Let the fun carry on then....


Nice hat.

jeff montanye's picture

nice hat, nice talk.  what's not to like?

Rockfish's picture

I saw this article briefly on my phone today but had to wait till now to look into it. BOA seems to be the getting the attention it deserves but I am curious why no referrece on ZH.

Do your banking with local banks.


Cdad's picture


WTF?  WFT are you talking about?  CSWS bankers have declared....stocks up forever...because...Communist China bought Europe...really....really really...and math....is....overrated.

Get over it, man.

Cdad drinkin'


Thank the lord for AFV.