August 14, 2010
The Hindenburg Omen
Posted by Gordon Smith

This is the stock market ...


Some say this is the stock market in September ...

The "Hindenburg Omen" is forecasting a market collapse in September. You can read the Omen's requirements at the WSJ. This is the sort of forecasting used by people who believe that past prices provide crucial insights into future stock prices. 

You don't have to be Eugene Fama to think that these people are selling snake oil. The W$J: "The Omen was behind every market crash since 1987, but also has occurred many other times without an ensuing significant downturn. Market analysts said only about 25% of Omen appearances have led to stock-market declines that can be considered crashes."

The appearance of dire predictions like this are the flip side of Dow 100,000 and other crazy predictions of endless economic prosperity. The economy is rarely as good or as bad as the extremists among us imagine.

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