Thursday, June 15, 2006

Efficient: productive of desired effects; especially : productive without waste

So I'm watching the news last night. And some economist comes on (I wish I remembered his name) to comment on the hit the stock markets, particularly the TSE, have been taking the last few days.
First, he says that the markets are a model of efficiency. They are self-correcting and always right.
Then he says that markets are always over-correcting. Generally, when prices rise, they rise too far to reflect actual value, and then a drop in price occurs to correct, but the drop is usually too far and the over-correction results in prices that are too low to reflect actual value.
So let me get this straight -- the stock market is extremely efficient because it generally reflects a price that has little or no bearing on reality.


  1. Yes John. The market is efficient--at seperating marks from their money. Just as it always has been.

  2. I liked Gilbraith's comment that what the world needed was a one armed economist so that he couldn't say, "on the one hand X but on the other hand Y".