I know only a little about statistics and almost nothing about climate science, so I’m keeping clear of the debate about climate change that’s breaking out on Chris Joye’s blog … after I pass on this little pot shot a mate of mine (what happens to be an RV trader) sent me:
I have developed a really sophisticated computer model which predicts this asset is going up. It uses data relating to a phenomenon that has only existed in the very last part of the data. My relative value friend tells me to sell – but I am going with the computer model…
What I think he is getting at is that there is a consistent human trait across disciplines, markets, and time – for some reason, folks are inclined to buy expensive and sell cheap.
The more extreme the recent ‘price action’ the more likely we are to overweight it, and find some complicated reason to justify going with the recent trend.
History suggests we’ll invest a few trillion in preventing global warming, whereupon the world will start rapidly cooling – and we’ll realise that our models are flawed (as usual) and that we understand less than we think.