Jolly_Rancher

Is Financial History Bunk?

As long as the relationship between variables (i.e. cause and effect) is logical for the situation, the forecast should be good enough to outsmart most investors. For instance, the dramatic rise in oil to $147 should have warned you to stay out of the auto sector. Combined with the crash in housing, you should have known to stay out of stocks all together, at least as of January 2008. Now suppose most people with SUVs trade down to very fuel efficient cars or move closer to work before oil prices sky rocket the next time? At that time housing will probably not be the primary concern. What will be the issues? These are the types of things to consider. Econometrix is not a substitute for logic, but is a tool. Cause and effect must be determined in advance or with the help of econometrix.