Art Cashin's Refresher On "Post Hoc" Syndrome

Tyler Durden's picture

Nassim Taleb rants against it all the time: the propensity for the media to frame a narrative, or a plotline, to explain market moves. His contention is that for the human mind it is always far more reasonable to have a cause and effect relationship to what is effectively an engine of chaos at the margin, especially these days when the margin is defined 70% by various algorithms, all of which engage in often times illogical feedback loops (such as the ES is high because of a high EURUSD, which however is high due to stressed French banks liquidating USD-assets and repatriating the funds to shore capital) and/or with levered synthetic products such as ETFs, amplifying the noise. On the other hand, sometimes a narrative fits: what Art Cashin describes today as the "post hoc" syndrome. Is he right, or is the human mind desperately grasping to attribute a pattern, and thus pretend it is in control, when faced with the strange attractor that modern capital markets have become. You decide. Here is Art explaining the basics of "post hoc", aka Monday Morning quarterbacking.

From UBS' Art Cashin:

Tear Gas, Timing And Logical Fallacies - On the Friday before Thanksgiving, I maintained that the afternoon selloff that led to a technical breakdown the day before had accelerated when headlines about unrest in Athens turned uglier. A few readers questioned what they saw as a time gap between the headlines and when the market reacted. That merits a review for a couple of reasons. The most important of these is probably the “post hoc” syndrome.

As you probably recall from your fifth grade classes in epistemology and logic, there are about seven or eight logical fallacies. The three most frequently cited are usually - begging the question; hasty generalization and post hoc. The full title is post hoc, ergo propter hoc. That, as you recall, is “after this, therefore because of this”. Since B happened after A, it was probably caused by A.

The post hoc fallacy is quite common in Wall Street. The main stream media often credits an up market to some piece of economic data which came out hours and hours before the rally that produced the “up day”. You’ll often see headlines like “market rallies on claims data”. The problem is that the claims data hit at 8:30 and the market didn’t even get into plus territory until, maybe, 2:45 in the afternoon. That’s classic “post hoc”.

While data like claims and payrolls tend to be finite triggers, some information can be more of a process, where the impact may be cumulative. That was the case, for example, in the Kennedy assassination.

The first headline was something like: “Shots reported fired at President’s motorcade”. (That’s bad.) Then, minutes, later “Reports that President may have been hit”. (Worse but no detail). Then, more minutes, “Motorcade diverted to Parkland Hospital”. (Even more serious.) That’s when they closed the Exchange. The series of headlines had a cumulative impact.

The sharp selloff on the Thursday, a week before Thanksgiving was a reaction to cumulative headlines. In Friday’s Comments we wrote:

Around 12:30, just as U.S. markets were retesting the morning lows for a second time, things changed.  Headlines hit that anti-austerity demonstrations in Athens had turned ugly - maybe very ugly. Clashes with police were said to be intense. That brought more selling in stocks breaking the morning lows and almostinstantly the key support at the bottom boundary of that universally discussed “triangle”.

That phrasing was intended to indicate that cumulative impact. We were also quite reinforced by the fact that Dennis Gartman and other veteran market observers saw the same cumulative trigger in Athens. But a review of “post hoc” is always in order. See you back in logic class.

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Gubbmint Cheese's picture

another logical fallacy: the US economy has decoupled from the rest of the Universe

redpill's picture

Yahoo Finance! has dubbed yesterday's one-day spike in stocks resulting from coordinated central bank intervention as the "December rally" even though it wasn't December and certainly wasn't sparked by any fundamentals characteristic of a rally.

 

Looking forward to the afternoon headline that "investors were profit taking" because stocks didn't close green.  Whatever.

 

Liquid Courage's picture

Quite right, but that's actually a good example of "begging the question" - i.e. arguing by assertion, or stating an unproven conclusion as if it were a premise and then using it as a point of departure for a "logical" argument. Such as: well since the US economy is decoupling from the global economy then it's obviously time to buy US stox ... duh!

I first studied Logical Fallacies  - from the standpoint of scientific and technical writing - as pitfalls to be avoided. Then I later encountered the commercial and political spheres where they are used as tools of persuasion. It's a wicked old world we live in.

GeneMarchbanks's picture

He's a bored old man.

hedgeless_horseman's picture

 

 

+1 to Tyler for that first paragraph.

My experience with this phenomenon is that sports commentators' post-game "analysis" of outcome causation rarely, if ever, has anything in common with the causation as surmised by the athletes and coaches.

Nobody For President's picture

Ditto. Also, great nom de plume Hedgeless, been meanin' to say

JSD's picture

Whatever floats (or sinks) your boat.

The Axe's picture

Sorry Art!   Thanks for the logic lesson! But I don't get the point.

RockyRacoon's picture

In that case you shall always fall victim to said fallacy.  Poor guy.

Imminent Collapse's picture

Here's another:  Bailing out the banks will solve sovereign insolvency (or any insolvency, for that matter).

Cognitive Dissonance's picture

Is he right, or is the human mind desperately grasping to attribute a pattern, and thus pretend it is in control, when faced with the strange attractor that modern capital markets have become.

It is just a little more complicated than that. Let's not forget the overt and covert manipulation that is covered up and over by the mainstream media story telling. The MSM is the keeper and spreader of the public myth. This is not by accident, but rather by design.

That's not to say everything that comes out of the idiot box is a lie. Just 95%.

Tsar Pointless's picture

Good to see you on here, CD. You are absolutely correct - it's all by design.

No conspiracy or tinfoil in that statement. Just an iteration of fact.

trav7777's picture

no; it is not by design...it is emergent complexity, which is not the same.

Here's a good example.  We all think "zero tolerance" is stupid.  That's because it is.  In the schools systems, privately, off the record, NOBODY will defend it.  They all think it's stupid too.  Yet.nobody.does.anything.  They all ADVANCE it in fact.  If you speak to them privately, in their private frame, they agree with you.  They're not idiots.  They're not malevolent.  In the public context, they become agents of the system.  It's almost like a split personality.

The system has its own mind, just as a school of fish appears to have some hive brain as well.  The system has its own demands.  Perhaps it's a byproduct of natural selection such that people who adhere to the system's goals achieve preferential outcomes.

I am among the few people I have EVER met who will stand up and speak out against the hive mind's goals.  And I routinely watch people WHO AGREE WITH ME directly oppose my actions.  They may even come AFTERWARDS and say, btw I agree with you, despite having JUST not only contradicted me but attempted to ostracize me from the hive.  People defend the hive and the hive's mentality even if they disagree with it.

This is a highly interesting animal phenomenon...like lemmings collectively marching to what they invidually would fear.

I would bet when I drop a race grenade in here that half the people who call me RAYCISS actually agree with me 100%.  In fact, their opinions on these things would in many cases scare me.

VyseLegendaire's picture

" it is not by design...it is emergent complexity, which is not the same."

 

aye aye.  As animals we fear social exclusion, or something like that.  It's going to be our downfall as a species.

chindit13's picture

Damn it, trav, you made me log in!

"emergent complexity"  Bingo!

Have at this one, CogDis, and you've found yourself a string of new articles.  I'll be waiting to read your output.  We all like to think we're the lone wolf, contrarian, follow-the-beat-of-our-own-drummer types, but few really are.  Perhaps left alone to our private thoughts we are, but get us in a crowd, especially one to which we feel obligated to belong, and something at the genetic level takes over.  I actually do mean at the genetic level, by the way.

Now back to trav.....

First, a slightly embarrassing confession.  I scroll Comment's Sections looking for your easy to spot avatar, because I know the comment is not only going to be entertaining, thought provoking, occasionally riling, often informative, but also that it will elicit a knock-down, drag-out Fight Club Main Event.  Wallflower you ain't.

I haven't yet seen you post anything that has emerged from Craig Ventner's Human Genome Project and related studies, but there are some fascinating, even disturbing revelations.  Here's a taste:  a possible "Compassion Gene", a possible "Happiness Gene".  Neither seem to be evenly distributed across the species.  I'm not sure we want to go there, but I suspect trav has already, or soon will, book tickets.  The ultimate mystery of what makes us what we are is being revealed, its implications not yet known.  It's an interesting time to be above ground, at least if one has an open and inquisitive mind.

Finally, I smile when I see you chastise folks for cherry-picking MSM data.  I have a similar bug-a-boo, which is the way people show nothing but contempt and incredulousness for MSM reporting, but accept without question anything and everything that comes from what I call the Internet Gurus.  There are things you know, as well as things you believe, and you continuously stand ready to "educate".  There are some few things I know, but when I see someone who has it wrong or is woefully naive in a Downing Effect sort of way ("I'm awake, unlike the sheeple!"), I rarely bother.  I doubt I can change a mind.  I guess that makes you, rather than me, an optimist.  No doubt it's in our respective genes.

trav7777's picture

I find willful ignorance of reality to be tantamount to suicide.

There are a lot of people who would rather commit suicide than accept reality.  This is a fact.  I cannot yet figure out why except that they fear being ostracized more than they fear dying.  This would appear to be a result of some deep-seated evolutionary behavior...

The evidence in favor of Watson's thesis is so voluminous as to present force majeur against its opposition.  Yet it is "outside the realm of appropriate scientific discourse."  You know what's more...I GUARANDAMNFKINTEE that EVERY SINGLE scientist who spoke out against him KNOWS, ADMITS, CONFESSES IN PRIVATE that EVERYTHING Watson said is true!  It is inconceivable that they could be stupid enough in their positions as to be unable to dicipher the truth.  Yet they profess the opposite and threw a colleague who spoke the truth under the bus.  They assassinated him.

If this BRA shit proceeds to its logical conclusion, the society our forefathers built will be utterly destroyed as nearly all the cities targeted in the Great Migration have been.  We will end up like Detroit or Zimbabwe.

Yet the hive seems hellbent on going there.  I know that the message is shaped by a select few people of a particular interrelation, and must conclude that their likemindedness creates an improper inference of conspiracy.

trav7777's picture

lol...prepare to be ostracized.

I don't know why i have this habit of saying what everyone is thinking, but I do it.  And then I watch as people who've confided to me in secret that they agree 100% (or even more) deny deny deny it and side with the hive.  I find it absolutely bizarre; people really confound me.  And how they go along with charisma when they all admit the leader is an idiot.

As for genetics, epigenetics, and evolutionary biology...phew.  I dunno if it's necessary that I go there because nobody seems to want to hear any bit of where I do go on genetics.  None of our traits are evenly distributed.

I await the explanation of how blacks have the top 100 100m times in history.  Must be whitey's fault somehow.  Happiness, compassion, ethics, or our sense of what's deeply RIGHT in a sense, are not shared.

People can't figure out what Driving While Black is...it's not.  It's Driving LIKE Black.  They also can't understand why blacks feel persecuted by the law.  It's because their typical sense of the proper constraints of civilization are DIFFERENT *shudder* than whites, which seem loud, obnoxious, and even barbarian to east asians.  What white people think as permissible under the law seems oppressive to most blacks, who lack the impulse control capacity that whites have or that asians have.

As the genome gets decomposed further, these traits will begin to be identified with concrete sequences.  So much of how we act is genetic that it isn't funny.  It's the reason you're like your dad even if he didn't raise you.  People given up for adoption still walk and talk like their biological parents.

On the topic of emergent complexity it is the height of irony how ZH has its own orthodoxy and if you cross it, very very few are even brave enough on the internet to take the risk to defend the truth or anyone speaking it.  There are individual would-be cults of personality and they don't like being challenged.  Me, I am like the speed of light, the same in every reference frame, as combative and irreverent here as anywhere else LOL.

Either way, though, yeah, I keep trying to educate people.  I keep trying even better metaphors and analogies to try to get them to grasp.  Perhaps this is borne of arrogance?  Maybe I think I'm so good I can make the blind see, who the fk knows hahaha

chindit13's picture

I think I earn my own ostracism here, as I have a different belief system than most of the regular posters.  My scorn comes not from my views on race (I'm willing to judge everyone individually and accept that all of us have pluses and minuses), but from my views on who runs the world.  From personal experience, I know that if one climbs above the timber line and has a view of the top of the mountain, the only folks up there are the newly arrived.  While they do try to set up camp, other parties are approaching the summit and are ready to knock the squatters off.  It is a constant battle, driven by ambition and ego, with more than a touch of vindictiveness.  There are no Lizard People.  I suppose for many the idea of general randomness, save for the flailing of those who have a short term lease on the summit, is more unsettling than the belief that somebody, even a malevolent somebody, is in charge.  I guess there is an odd comfort in having either a god or a devil, because it keeps open the possibility of a deal.  There is no deal to be made with randomness.  Shit just happens.

Nobody For President's picture

"It's an interesting time to be above ground, at least if one has an open and inquisitive mind."

 

+1 for that, old man...It is indeed!

Eally Ucked's picture

Hey man, as defender of humanity you should  defend Trav , who looks to me as banned person for now, I know he's little rough on the edges but still has big input to that site, hate it or love it any way. 

slewie the pi-rat's picture

what did he do now?

corrupting the youth?

hemlock, BiCheZ!

Cognitive Dissonance's picture

It appears that Trav is alive and kicking. If he were banned you would not be able to see his history. And what a fine history he presents. :>)

http://www.zerohedge.com/users/trav7777

Oh look, here he is now.

http://www.zerohedge.com/news/sdr-same-demented-regime

trav7777's picture

u talkin bout me?  Nah man, I am alive and kicking.

I intend to be relentless on this "MSM only tells the truth about stuff I want to believe" meme.

trav7777's picture

yes, I know...anything they say about race and ethnicity is 100% true.  It's just got to be.  Fuck the data.

RockyRacoon's picture

Be sure your arguments don't fall under the "begging the question" fallacy.   Going forward with an argument based upon unproven statements or false conditions will result in fallacious conclusions.    Of course, we like a little fallacious now and then, don't we?

trav7777's picture

well, I like fellatIO from your mom...does that count?

But, no, I'm not using petitio principii

 

RockyRacoon's picture

Being a gentle person, I'll let that pass.

mkkby's picture

Well, the MSM does report the higher crime rates of various races... which is why you know it unless you are doing your own research.  So your statement "everything they say" IS false.

PS - Feel free to have sex with my mother too.  She's dead so you'll just be admitting to your own perversion :)

mkkby's picture

Cog Dis -1

You statement is another logical fallacy.  Since everyone is lying, there must be some unseen force directing it all from above.  It can't just be everyone talking their book. 

Tsar Pointless's picture

I was once a newspaper reporter. Back when I was in journalism class in high school, we were specifically taught and told to write in language geared to an eighth-grade level of reading comprehension.

Now, I daresay that level has dropped considerably - quite possibly to a fourth-grade level of reading comprehension.

Take note of articles you read in newspapers and online sites. You'll see a lot less mult-sentence paragraphs, and an abundance of one-sentence paragraphs.

Everything about Amerikkkan society has been dumbed-down, with a race toward the lowest common denominator being the meme.

Thank the Prussian education system - upon which we modeled our education system - for this societal trait.

TheMerryPrankster's picture

There are 2 ways you can write. Write above your audience and hope that curiousity will make them learn a new vocabulary so that they might understand new concepts and by doing so make the world wiser.

Method 2, write down to your audience, destroying curiousity and continually dumbing down your audience, until they must be reminded to breathe.

Why would anyone dumb down their audience unless it was to exploit their ignorance?

It's harder to cheat someone who understands what is happening.

trav7777's picture

LOL...i write so far above my audience in my professional life that they ask me to dumb it down.

There is no curiosity out there.  Nobody wants to acquire perspicacity into the inherently abstruse.

Chuck Walla's picture

Why learn and understand beyond how the SNAP card works?  The money comes regular from Uncle Sugar Daddy. I know who to vote for, they tell me.  Thinking is over-rated, see the bozo in the White House for proof.

trav7777's picture

I believe the average grade level among blacks is probably 5th or 4th in terms of reading.  Large swathes are functionally illiterate.

No, more money, AA, and racial setasides will not fix this.

Randall Cabot's picture

That's because nobody goes there because it's too crowded.

blunderdog's picture

You can only write as well as your tools permit.  Look at what's been done to the "American" vocabulary in the interests of marketing some product or political agenda.

Communicating any concept of any complexity is near-impossible to Americans because you have to define all your terms first, and half the time, the audience will "disagree" with your definitions and sidetrack the discussion before it begins.

Dealing with simple ideas is easy, and can be done in that 8th-grade vernacular.

So we end up a country that believes Saddam Hussein was involved in the 9/11 attacks.  That's (sadly) just as well as we can do.

Bwahaha WAGFDSMB's picture

I thought the 2 ways of writing were, keep it simple stupid, and baffle them with bullshit.

Randall Cabot's picture

The Prussian education system? LOL What kind of a guru are you anyway?

mkkby's picture

Yes, you are being pointless.  Reading comprehension has nothing to do with logical correctness.

JSD's picture

And let's not forget that Taleb also argues that the more voltile the market swing, the more likely it is to be attributable to some event/events. Now one must determine for his/herself: "What is considered volatile?". At present (IMO), attributing a 1% move in ES to any news is, at best, theater.

lsbumblebee's picture

That's quite a sermon, coming from someone who doesn't believe in the Plunge Protection Team.

RockyRacoon's picture

What has one to do with the other?  His comment is not nullified because he might disagree with you on the weather.

Gubbmint Cheese's picture

If the market can go up 500 points in a day.. doesn't that mean it could also FALL by 500 points? Hmm.. when was the last time we saw a drop of that magnitude?

 

Nucking Futs's picture

Here's another fallacy:  Learning epistemology in the 5th grade.

slewie the pi-rat's picture

well, yes, but art said logic, not epistemology

this is the cirriculum:

  1. finger painting
  2. trolling
  3. logic
  4. epistemolgy

any questions? the answer is 2!

 

Let them eat iPads's picture

Example:

Stock fall after trouble reported at Kardashian household.

ebworthen's picture

"As you probably recall from your fifth grade classes in epistemology and logic..."

Didn't Art mean the graduate philosophy classes of the 1900's?

In fifth grade these days they are learning about the bad white man, and how to use an iPad.

I was wondering why I've seen less of Art on CNBC lately; must be the new producers, who seem to love post hoc histrionics.

RockyRacoon's picture

Back when a person was actually educated upon attending school, I had 2 years of Latin, in the 5th and 6th grades.  It has served me very well.

<Edit... somebody doesn't like Latin it appears.>

defender's picture

Nah, they just don't like people being educated in school.