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Daily Speculations The Web Site of Victor Niederhoffer & Laurel Kenner Dedicated to the scientific method, free markets, deflating ballyhoo, creating value, and laughter; a forum for us to use our meager abilities to make the world of specinvestments a better place. |
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Weapons of Mass Destruction and the Market:
Omid Malekan, a senior member of the
Old Speculators' Association at 20-something, sees fascinating
crossovers in the debate on WMD intelligence with speculating in the financial
markets. (2/5/4)
For the masses, egged on by various media outlets, the main question seems to be whether our intelligence was "wrong" or perhaps politicized. But as George Tenet and others in the business have been saying, intelligence is never completely "right" or "wrong." Here is a quote from what Tenet said today:
"The question being asked about Iraq in the starkest terms is, were we right or were we wrong? In the intelligence business, you are almost never completely wrong or completely right. That applies in full to the question of Saddam's weapons of mass destruction. And like many of the toughest intelligence challenges, when the facts of Iraq are all in, we will neither be completely right nor completely"
To me that is a perfect description of what many of us "scientific" traders who try to formulate specific cause - effect scenarios before we trade are confronted. When looking at historical patterns I often come across a set of variables that point me in one direction and a second set that point to the opposite direction. Combining them is just curve fitting and useless. So as much as I like to be scientific, or a countist, I still have to make a judgment call. Going back to Iraq, some people keep complaining that there were dissenters within the intelligence community about the WMD. Before addressing that, we first have to ask whether there ever aren't any dissenters on any intelligence conclusion.
Whether a trade is right or wrong is only decided by history. All I can do before the fact is decide whether the trade is good or bad. Did I consider all of the scenarios? Am I trading for the wrong reasons? Is there some external factor that may be biasing the discretionary component that goes into any trade? By falling back on the idea that Saddam had the weapons 10 years ago, and has shown no signs of destroying them, intelligence analysts seemed to have fallen prey to an ever-changing cycle. Lord knows I have often made the same mistake myself.
David Brooks Editorial column on the problem with too much "Scientism" in intelligence
-- Omid