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Stock as a beauty contest…

Keynes as taken from Krugman’s recent excellent analysis of “freshwater” versus “saltwater” economists – trading is like:

“those newspaper competitions in which the competitors have to pick out the six prettiest faces from a hundred photographs, the prize being awarded to the competitor whose choice most nearly corresponds to the average preferences of the competitors as a whole; so that each competitor has to pick, not those faces which he himself finds prettiest, but those that he thinks likeliest to catch the fancy of the other competitors.”

It entirely captures the crazed and ironic nature of the legalized gambling found in the stock market. It also gives a clue how to invest if you’re going to try – it doesn’t matter if you like it, it matters if they like it. And whether they like it is totally random and only very, very, loosely tied to reality.

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