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The Futility Of Predictions
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The Futility Of Predictions

by The MoleJanuary 26, 2017

Back in late 2013 I wrote a piece on human nature which was in part inspired by the bullish exuberance exhibited by a MarketWatch article predicting the DJIA at 20,000 in the near term future. A bit over three years later that prediction actually became reality yesterday afternoon and I’m sure the author of that article as well as many other like minded traders popped some champagne in celebration of their awesome ability to predict the future. Now don’t get me wrong, I’m happy for those guys and for the Dow Jones. Assuming of course that everyone involved actually put their money where their mouth had been back then. Which few do and that rarely. And that in essence had been the underlying message of my post.

In yesterday’s update I briefly touched on hindsight bias and how all of us have a knack for bending the past in our respective favor. Nobody wants to look stupid after all, especially in front of others. And in hindsight all of us would have liked to have bought the S&P 500 at 667 in 2008 and then traded it all the way to just below 2300 today. Except of course that we didn’t (please raise your hand if you did). And that is quite a humbling lesson to learn in our ongoing quest to expropriate riches from market participants who happen to disagree with us. It’s not that we didn’t foresee this event, actually many of us probably did, but how difficult it is to actually translate information or ideas into profits. Because back in 2008 as well as in 2013 we had no way of truly knowing where the DJIA or the S&P 500 would be trading all those years later. So what makes you think you know what the future holds – today?

Over the eight plus years, since the launch of this trading blog, we have seen markets change, regulations change, and even the way we trade change (mainly due to mobile technology). We now compete with high frequency trading robots executing dozens of trades within nanoseconds, and we now have to content with online social media which has the power to amplify a rumor into a market slide within mere minutes. If you think predicting the price of the DJIA over the next week is difficult then attempting to predict what may transpire several years down the line is not just foolish but borders the insane.

Welcome To The Future

The other day my wife sent me an article she had gleaned from her Kurzweil mailing list. And quite frankly it gave me the chills. Apparently our esteemed EU leaders in Brussels have decided that it would be a great idea to introduce laws specific to robots that could give them civil rights regulations of their own, and see limits on how many jobs they could replace from humans. So not only will I be out of work sometime around 2025 but slapping my toaster for burning my slice of wheat may get me into legal trouble, at least if the EU has its way. Which of course is a completely different story as the future of the European Union is looking dimmer by the day. So perhaps it won’t be all bad after all.

But instead of hover boards and flying cars we’ll be dealing with moody entitled hyper intelligent robots who will be able to perfectly learn a language or learn a trade in 15 minutes instead of 15 years. And they may have rights on top of all the obligatory regulations. A brave new world indeed! Maybe I can train one to run this blog and move my crusty butt to Aruba. The jokes may be a bit stilted at first but I’m sure version 2.0 will have that fixed in no time. Unless of course the damn thing is made in Germany.

But all joking aside, have any of you considered the impact of machine learning and artificial intelligence to our own immediate reality as traders? And I’m not talking in perhaps ten or twenty years from now but perhaps in three to five? As a matter of fact I personally started to dabble with various aspects of machine learning in 2014 and what I learned after expenditure of much time, blood, and sweat is that it wasn’t ready for primetime – just yet. But that can change quickly especially if you throw advanced artificial intelligence and cloud computing into the mix. With AI we are talking about the potential of a semi-conscious intelligence which may soon not only exceed the realms of human intelligence and reasoning but keep growing from there -exponentially. Ray Kurzweil once called that moment in time ‘the singularity’ and let me assure you that it is approaching quickly. Or perhaps it already has come and gone deep down in some government sponsored AI laboratory.

Which of course means that not only is the future absolutely unpredictable but that the pace of change is only going to keep accelerating. And mind you, that doesn’t mean that technology will evolve on a linear or exponential curve. There may be setbacks triggered by wars and social chaos. But it is clear now that the only reliable aspect of life in the future will be that of change itself. And good luck predicting that. Or the financial markets for that matter.


About The Author
The Mole
Mole created Evil Speculator amidst the chaos of the financial crisis in early August of 2008. His vision for Evil Speculator is a refuge of reason, hands-on trading knowledge, and inspiration for traders of all ages and stripes. You can follow him and his nefarious schemes at various social media waterholes below.
  • http://gerb-reloaded.blogspot.com/ Gold_Gerb
  • Yoda

    It is indeed worrying, but there is nothing we mere mortal can do about it. The more I worry about the future, the quicker I age.

  • http://gerb-reloaded.blogspot.com/ Gold_Gerb
  • http://evilspeculator.com Sir Mole III

    Thanks for posting that link yesterday by the way.

  • ridingwaves

    no biggie were just dust in the wind…
    https://www.youtube.com/watch?v=tH2w6Oxx0kQ

  • Yoda

    most welcome

  • http://gerb-reloaded.blogspot.com/ Gold_Gerb

    Is Captain Jack (or was it Sparrow) still around?
    he liked channels. such a kid back then.
    😉

    https://uploads.disquscdn.com/images/c31dc0346de65e53873084c3fa76f3361e8f369bf8e33531f8fd53a8a955d4b4.png

  • http://greenlander1.blogspot.com/ Greenlander

    I lightened longs in a big way this morning. I only have JWN, M. There are some things that are not ideal here including low put/ call ratio and sentiment is really bullish now.

  • BobbyLow

    Outstanding piece Mole. I don’t know how many readers you have on ES but your writing is worthy of submission to media much wider than the Evil Speculator.

    In regards to the fuzzy headed EU Bureaucrats who think it’s a good idea to “introduce laws specific to robots that could give them civil rights regulations of their own, and see limits on how many jobs they could replace from humans.” This is of course crazy but machines and robots have been replacing human jobs for many years. And this combined with the exploitation of cheap labor from the “New World Order” has led to emaciation of the working class. This might make one wonder who has benefited the most from the “New World Order” but that’s for another conversation. We do have cheap Flat Screen TV’s and can entertain ourselves all day on our Smart Phones though. . .

  • Edd

    Thanks for post Mole. I came to the conclusion several years ago that time was simply running out on the future of trading such as it currently is for folks like me. I have convinced my son to not try and follow in my footsteps but rather stay in the field he is in. I literally feel like I am in a race to the finish to who lasts longer. Me time wise or the market ceasing to exist in a way that allows an old man sitting at home in his pajamas being able to bank coin day after day.

  • ridingwaves

    we are already controlled by a 10 digit code that tells us what we can or cannot buy….

  • ridingwaves

    2201 is a good spot to shake out some new I need to get in Trump didn’t crash the world longs

  • http://greenlander1.blogspot.com/ Greenlander
  • http://gerb-reloaded.blogspot.com/ Gold_Gerb
  • ridingwaves

    what is your target if you have one?

  • http://greenlander1.blogspot.com/ Greenlander

    lower yellow bar. Ideally below this range but not planning on it

  • http://evilspeculator.com Sir Mole III

    “Outstanding piece Mole. I don’t know how many readers you have on ES but your writing is worthy of submission to media much wider than the Evil Speculator.”

    I was actually invited to post at investing.com but stopped doing it as they took a day to actually approve my articles, by which the respective entry opportunity of course was long gone. Otherwise I mostly get interest from clickbait farms and SEO idiots from India. Compared with the shit I see in the financial MSM one would think that someone would take notice.

    On the other hand there are not too many outlets where my style of content really fits. I mean I doubt I will be invited to post on MSNBC or ZeroHedge anytime soon 😉

  • http://evilspeculator.com Sir Mole III

    Best think you guys can do to help is to actually promote the content via social media. I posted the buttons on top of the posts but apparently nobody uses them.

  • http://evilspeculator.com Sir Mole III

    It takes a lot of work and most of all discipline. I still think there is a place for discretionary traders, the support of whom has been the core mission of this blog.

  • ridingwaves

    at some point a rotation into XBI-IBB will be here…I’m not good at shorting during earnings season…in fact I would resemble the buffalo bills in super bowls….

  • Tomcat

    That rotation would be certainly welcomed by me. Biotech has been lagging bigly

  • BobbyLow

    Hey RW,

    I hope I don’t jinx it but it looks like the “fickle feathered” finger of Crude is sending price upward at this moment. We’ll see how it closes but so far so good for us today. :)

  • http://greenlander1.blogspot.com/ Greenlander

    yeh actually I took a sizeable long in XBI yesterday and changed my mind today after looking over things last night. Im looking for maybe around 60-61 in XBI but I could see it popping big at some point and hitting 68-69

  • ridingwaves

    it probably all comes down to the big oil boys of wall street slobbering over the overcrowded short trade and the ability to make a lot of change on it….
    over the last 5 years, crowded trades no matter bullish or bearish seem to get an ass whipping…

  • http://greenlander1.blogspot.com/ Greenlander

    didn’t realize explode out like it did in the past wedge of what was a pretty promising candle 2 days ago so I let it go this morning. could still blast off but Im wary of the overall market now. https://uploads.disquscdn.com/images/fc230b09b70249d054a5ef0ccb748bc252a70dc256c735520dfcd81a9beb0d75.png

  • ridingwaves

    the 2 gaps below have been bugging me for a while thus tempering any mojo for me…

  • http://greenlander1.blogspot.com/ Greenlander
  • http://greenlander1.blogspot.com/ Greenlander

    yeh if it continues drifting down slowly Ill feel more comfortable about going long. Ideally it would correct at an even more shallow angle than last time

  • BobbyLow

    Totally agree.

  • ridingwaves

    it might be part of the blow off top….I think April May June look best for sustained move higher….

  • ridingwaves

    maybe because its the 5th innovation wave but I believe it somewhat falls into the 6th wave also
    http://www.naturaledgeproject.net/images/clip_image004.jpg

  • http://greenlander1.blogspot.com/ Greenlander

    Yeh I am not terribly bullish for Feb and maybe March. If things line up well with seasonality and the current overbought scenario, April could be good

  • Edd

    It would be fascinating to know how many retail discretionary traders there are out there? Not those trading as a sideline. Not those trading from accounts derived from other sources. (Note: I could afford to blow up two accounts and survive to succeed from funds built up from other pursuits) Not those trading as a hobby. The actual amount of those earning an actual living from trading, and trading alone? This is my only source of income. No pension, no benefits, no social security.

    If no coin here, Walmart greeter position here I come.

    You, Scott, Ivan, the blog and all others here was the support needed at a time in life I otherwise would have quit. Mission of the blog more than fulfilled in my case. Hope life and the market has many more years for me, just not so sure the longevity of either. Day by day…….

  • http://gerb-reloaded.blogspot.com/ Gold_Gerb

    I have had more upper cuts than Rocky.

    QQQ’s weekly.
    https://uploads.disquscdn.com/images/447a524e3e8225702b4f29b1f4641d2605795230edde79883d9dc84960832daa.png

    and don’t let that band fool’ya. it’s gone above it relatively. (red arrow).
    😉
    Yo Andrian!

  • BobbyLow

    LMAO at “Walmart Greeter”. I would make the grumpiest greeter that Walmart has ever had.

    You talked about losing and that’s part of the process I guess. Speaking of which, I have a Phd. in what not to do in this business. :) Making money “on purpose” by trading is one of the most difficult thing to do that there is. We have to fight against everything imaginable and even things unimaginable. Perhaps we have survived because we got pounded enough to develop sufficent discipline and learned the hard way to develop rules as to when to get in a trade and more importantly when to get out of one.

    In the mean time, it’s still one trade at a time, one day at a time. . .

  • Billabong

    Stopped out this morning on the other 1/2 of the short oil trade for BE (0 R). CL is on its way to closing at the highest point since 6 Jan. The give away yesterday for a higher move was the creeping up of the 25 EMA. I may join the long side, although CCI is already at +168 … It may be a good trade but not a great one (New Year’s resolution to take more great trades than good ones … LOL).

  • BobbyLow

    I hear ya BB.

    I’m taking less and less trades myself primarily because I’m only stalking 2 or 3 things now. But fewer trades have brought along increased R levels. Sometimes it feels like all this stuff is correlated anyway.

    EDIT: I still take every signal especially carrying a smaller stable.

  • http://evilspeculator.com Sir Mole III
  • http://evilspeculator.com Sir Mole III

    Why don’t you use Bollingers?

  • http://evilspeculator.com Sir Mole III
  • Edd

    Well said Bobby. The saying”you learn more from your failures than your successes” sure resonates with me. Should have been a frickin genuis by now. Nothing, and I mean nothing has taught me more humility in a long life than trading has. I do love it so.

  • http://evilspeculator.com Sir Mole III

    Stories from people like you are why I take my role here very seriously. If I can only save one person (beside me) from facing retirement in poverty then I think it was time extremely well spent.

    Just promise to not urinate on my gravestone 😉

  • http://evilspeculator.com Sir Mole III

    What you really learn about is you yourself – how you handle failure and what you do next. The market is one giant personality litmus test.

  • Edd

    My father showed me a book of qoutes from various famous figures in my early days. One stuck with me through life. After the completion of WW2 Winston Churchill goes to a graduation commencement ceremony as the speaker. Walks to the podium clears his throat and simply says “Never, ever, never quit.” Turns around and walks off the stage. Strategic retreats may often be wise, I cannot stand the thought of failure.

  • Edd

    Ha! no worries there. Catheters have ruined my aim!

  • http://gerb-reloaded.blogspot.com/ Gold_Gerb

    better experience for myself. not that it’s superior.
    (SMA envelopes or Keltners)

    “Unlike Bollinger Bands, which uses standard deviations to calculate the width of the channel, Keltner Channels uses the exponential moving average and a multiplier on the ATR to determine the upper and lower bands. … The Keltner Channel indicator uses two inputs to configure the indicator.”

  • http://gerb-reloaded.blogspot.com/ Gold_Gerb

    after a full dinner, I may be rash about the 58 envelope.

    I’m spotting a half-cycle of 24 to 25 weeks. So 50 is a great fit.

    Question now is, touch the top rope(s) and reverse? or trend?
    Let’s hope I don’t choke on a cue ball.

    https://uploads.disquscdn.com/images/420ee0701083e731b5bdacb36420577ce82136cd8cece865b22669e2642cc4b4.png

    Plan the trade, trade the plan.

    -GG

  • JackSparow
  • http://evilspeculator.com Sir Mole III