Researchers and pundits sure as hell aren’t soothsayers

I’ll never forget the somewhat reproachful words of Her Majesty the Queen when she visited the London Stock Exchange after the financial crisis of 2008: 'Did no-one see this coming ?'

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In a short declarative question she demonstrated that you can have thousands of super educated people in the markets opining about all sorts of economic, financial and political matters, and yet you can still miss the obvious.

You may remember that only recently the perceived wisdom was that risk was leaving the financial system, gold was worthless and would drop to $1100, and that rates were heading upwards with a commensurate rise in long term bond yields.

Well, a week or two is a long time in the markets - especially when Russia starts rattling its cage, or rather its sabre in Ukraine. City traders have suddenly found themselves whip-sawed by rising bond prices, gold approaching $1300 an ounce, higher oil and wheat futures, and a total panic in emerging markets. Luckily Vladimir Putin seems to have reacted rapidly to the strident voices of the international community, and almost certainly to the 10% collapse in the Russian stock market. In these days of instant media, markets talk more eloquently than government minsters and diplomats. A mere handful of shots have been fired in anger by Russian troops and these were aimed at the sky rather than at Ukrainian troops, with a restraint not shown by Yanukovych’s forces in Kiev’s main square.

There’s one lesson to be learned from all of this. History never teaches us anything. It’s a great irony that in the 100 anniversary year of World War I, we were a few shots away from potential military confrontation all over again. It would only have taken one of those Russian soldiers to have shot in panic, misfired and taken out a Ukrainian soldier, and we would have seen an immediate escalation of the situation and a far greater sense of turmoil. City researchers and pundits provide fantastic coverage of the markets, but they sure as hell aren’t soothsayers.

images: © Laineys Repertoire, © World Economic Forum

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