May

2

The route by which I take my son to school got me thinking about the distances between two points.

If I take the most direct route it means negotiating a road packed with cars and little likelihood of a 100% legal parking opportunity. Unpleasant and stressful to say the least.

On the other hand, there's another road running parallel which is connected by a footpath; only a few parents park there. Now getting to this other road is not quite as straightforward either. By the most direct path it means crossing a busy road. So the most efficient route once again means taking a slight detour so I can join the busy road with an easy left turn (bear in mind that Americans, Frenchmen and Germans drive on the wrong side) and then leave the main road with a right.

Thus we have left, left, 2nd right, left, left, 1st right, park, walk left through an alleyway and right out of the alleyway rather than left, left, 2nd left, right, 1st right. Route 2 is more direct but is ultimately less efficient and more costly.

This conclusion got me thinking about the wiggles in markets; why does the market move in such an indirect and apparently inefficient way? It seems that it could be because of the traffic, which makes me realize that passengers might find it as difficult to guess the S&P's eventual destination as any of my passengers might guess mine. Unless I tell them of course.


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