Saturday, August 6, 2011

Any chance they will learn? Not a big one….

All three articles on the exchange rate in the Herald at the moment show (again) that the financial economics texts which say “don’t bother even trying to predict exchange rates” are on the money.

Evidence and theory about market processes  are roundly hated by journos, pundits and news paper analysts. After all – if its true you can’t pick this stuff, what are they to do?

All the articles bemoan the “high exchange rate”, a couple dish out advice – to the Reserve Bank and anyone else silly enough to listen -  as to how to knock the guts out of the exchange rate. All were totally out of date with 24 hours of publication as the dollar danced down from touching $0.89 to embracing $0.83.

My test is always “so you say it’s too high? How many short contracts are you holding?” The answer is always, predictably (and rationally of course – since it is a mugs game only a “commentator” would think they can convince someone to believe) – “None”. No money where mouth is.


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