Efficient Market Theory

Several members of the far-flung ERJ family are in the market for automobiles and smart-phones.

It tested my faith in The Efficient Market theory.

"The Efficient Market theory" contends that all information is available to enough parties at the same instance that all knowable information is instantly incorporated into the price for an item like a stock in the stock-market (or used automobiles or smartphones).

The strongest form of TEMT contends that even insider information is of limited value, unless of course, you are a member of Congress.

The crowd-sourcing effect of free-markets means that items with dimmer future-prospects are discounted relative to items with brighter future-prospects.

When the egg-heads who proposed this theory released their academic papers, some of the best people on Wall Street challenged them. "Let's have a competition. If you say throwing-darts is just as good as our stock-picking, then let's all chose 10 stocks and see where we are at the end of the year. You throw darts at a page from the Wall Street Journal and we will unleash our formidable analytical powers."

The two professors assembled ten portfolios of ten stocks each (by throwing darts) and the high-rollers from Wall Street also assembled ten portfolios. At the end of fifty-two weeks there were no clear winners or losers. The results were scrambled.

Well, they were "scrambled" until you backed out the brokerage fees the "shooters" would have charged clients. If you did that, throwing darts came out ahead.

Emotions

All that is well and good, but emotions are at LEAST as powerful as analysis and rational thought.

When it really matters, even an attorney or accountant who graduated in the bottom 10% of their class is better than representing yourself...because they are FAR less likely to get emotionally engaged.

For better or for worse, various family members are making long-term commitments to various pieces of hardware.