PeakTrader.com

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PeakTrader:

• There is huge supply of potential less-educated workers. In 2007, before the recession, there were more than 22 million native-born Americans (18 to 65) with a high school degree or less not working. In the third quarter of 2009 it was nearly 26 million.

http://www.cis.org/node/1582

I doubt reducing the minimum wage, e.g. to $5 an hour, will put them to work.

Even before the recession, if that idle pool of low-skilled potential workers was put to work, it would boost GDP enormously, including through a consumption-employment cycle, and reduce budget deficits, by turning welfare recipients into taxpayers.

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Che is dead:

"The poorest and least-skilled in America suffer the most from legal and illegal immigration as competition for jobs reduces wages, according to a new report by a leading immigration economist.

Harvard economist George Borjas spoke about his report on immigration and its effects on the U.S. worker in a Tuesday conference call with reporters. He said the focus of his report was to answer “what happens when immigrants come into the labor market,” one of the central questions in the debate over immigration reform. …

… the wages of American low-skilled workers, who directly compete with immigrants, are reduced by some $402 billion a year. That amounts an average of $1,396 in reduced wages yearly for American workers, Borjas said.

Other winners are the businesses that hire immigrant workers, which benefit by $437 billion a year.

Those without a high school diploma lose the most, the report claims.

The overall result, according to Borjas, is a redistribution of wealth from America’s poorest to the owners of businesses and the immigrants themselves.

“There’s a huge redistribution of wealth,” Borjas said, which is where the argument of “winners and losers” comes in. …

Immigrants in the labor market increase the Gross Domestic Product (GDP) by $1.6 trillion, an estimated 11 percent, according to the report. However, 97.8 percent of that increase goes directly to the immigrants themselves. …

… illegal immigration has increased GDP by an estimated $395 billion to $472 billion a year, and that the benefit to Americans is six one-hundredths of one percent, or $9 billion a year. — Washington Free Beacon"

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PeakTrader:

I agree, we should honor people like Eugene Fama for dissuading people to follow the many futile hairbrain ideas trying to beat the market and get real jobs instead.

Of course. that doesn’t mean you can’t get lucky once in a while and even hit it big.

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Experts vs. Dart-Throwing Chimps
July 8, 2012

“Daniel Kahneman, a professor of psychology at Princeton University, knows a few things about human behavior and decision making, and he has a Nobel Prize in Economics to prove it.

The buyer of a stock thinks the price will go up and the seller of a stock thinks the price will go down. Both participants engage in the transaction because they believe the current stock price is wrong.

The financial services industry is built largely on this phenomenon that Kahneman calls an “illusion of skill,” or ability to exploit inefficient market pricing… this is what Kahneman found:

Although professionals are able to extract a considerable amount of wealth from amateurs, few stock pickers, if any, have the skill needed to beat the market consistently, year after year.

Professional investors, including fund managers, fail a basic test of skill: persistent achievement…the key question is whether the information about the firm is already incorporated in the price of its stock. Traders apparently lack the skill to answer this crucial question, but they appear ignorant of their ignorance.”

My comment: It’s the information you don’t know that’s important.

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There’s a difference between paying for services, e.g. capital preservation or portfolio allocation, and being fooled into believing you’ll outperform the market over time.

I’ve worked for Janus Funds and seen every investment scheme you can imagine.

However, generally, when times are good, you can outperform the market and when times are bad, you can underperform the market.

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Here’s what Daniel Kahneman, a professor of psychology at Princeton University, who won the Nobel Prize in Economics discovered:

When our brains become lazy, or we are not informed in a certain area, people tend to listen to so-called experts or pundits to clarify uncertainties. Kahneman and other researchers have discovered something – experts should be listened to as much as monkeys.

“The idea that the future is unpredictable is undermined every day by the ease with which the past is explained…Our tendency to construct and believe coherent narratives of the past makes it difficult for us to accept the limits of our forecasting ability. Everything makes sense in hindsight, a fact financial pundits exploit every evening as they offer convincing accounts of the day’s events.

And we cannot suppress the powerful intuition that what makes sense in hindsight today was predictable yesterday. The illusion that we understand the past fosters overconfidence in our ability to predict the future.”

“It is clear that for the large majority of individual investors, taking a shower and doing nothing would have been a better policy than implementing the ideas that came to their minds….Many individual investors lose consistently by trading, an achievement that a dart-throwing chimp could not match.”

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http://www.aei-ideas.org/2013/10/investment-fact-of-the-day-in-honor-of-eugene-fama/#comments

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