Uncovering the Truth of Modern Finance: A Look Into the Signals, Languages, and Confusions

Modern finance, like the stock market, can be a complicated subject that is often overwhelming to individuals who are not well-versed in the concepts. One influential factor that can affect the stock market is that of economic indicators. These indicators are supposed to point to the overall health of an economy, but they can often be misunderstood and misinterpreted. The Hoax of Modern Finance: Part 2 – Indicators, Terminology and Noise takes a look at how indicators for the stock market and their respective terminology can be seen as “noise” and further illustrates the lack of efficacy they truly have in helping predicting and understanding the economics of stocks. Economic indicators are those points in time where a change in a certain aspect of the economy may occur. For example, an employment report can show a pattern of job growth or job loss in an area or country. This data can then be used to provide insight into future economic growth or recession. However, indicators do have their limits. They can only provide a snapshot of economic data at the time of the indicator’s release and can be subject to considerable amount of data skew. Take the closely observed unemployment rate for example. It is a measure of how many people are without a job in a certain area or crunched into a percentile. This data is based on the previous month’s statistics and can be volatile due to seasonal changes in the data set. The data can then be a lcoudment to the stock market as it can cause investors to make hasty decisions or cause unnecessary fluctuations in prices due to the data reported. Indicators data can also be interpreted differently depending on who is interpreting it. An analyst may think that the data paints a positive picture while another analyst may see the same data in a completely different light. All of this combined with the unreliable trends of the stock market cause the indicators to become a “noise” rather than a reliable source of information. The article The Hoax of Modern Finance: Part 2 – Indicators, Terminology and Noise does a great job of illustrating how economic indicators are merely “noise” and can be unreliable when it comes to predicting the future. The article also highlights the fact that investors should be wary of these indicators and not try to base their decisions solely on them. Understanding the true power and influence of these indicators is key to being a successful investor.