The act of confirmation bias is where people
seek out data to confirm an incorrect hypothesis whilst ignoring data
that will falsify and thus refute the hypothesis. Today we are seeing a
lot of confirmation bias relating to the recent Brexit referendum.
The Brexit referendum in 2016 resulted not only in victory for the Leave campaign but a lot of confirmation bias from the Remain campaign. The Remain supporters were quick to point out a downturn in the
stockmarket but the FTSE 100 soon recovered. "Ah but!" shout the anti-Brexit supporters. "Look at the FTSE 250.
That is more representative of trade with Europe rather than the
globalised trading of the FTSE 100."
Yes, the FTSE 250 was still down at the time of writing this article but then all markets in Europe were down too as can be seen
in the EuroStoxx 50 chart below. After all, Euro companies are not
going to be shooting themselves in the foot by refusing to trade with
one of the largest economies in the world. These same Remain supporters
also pointed out that Sterling "appears" to be in free-fall against some
currencies. And yet they fail to notice that all currencies are constantly devaluing against each
other. Sometimes it is the Dollar falling, then the Euro, then Sterling, then another. A far better index of currency strength is gold, which has risen
against all currencies and not just Sterling, thus demonstrating the weaknesses of all fiat currencies.
Actually,
Sterling falling against the currencies of our main trading partners is
good for business as it makes our exports cheaper. At any other time a
devaluation of Sterling would be looked on positively in economic terms
but not at this time when it is given a different significance for
political purposes.
Another attack on a weaker Sterling
being good for business is to say that the UK is a net importer. This
is just a smoke screen. After all, so too is the United States a net
importer as can be seen in the chart below. Without exports the UK would
be on its knees. The fact that the UK imports so much can be
interpreted in so many ways. For example, overpopulation and the UK not
living within its means or the UK has a booming export business
requiring raw materials. Just blurting out "the UK is a net importer" is
just scaremongering to belittle our exports.
And
so, on many counts, we see data being used to prove a point that is
actually an untruth. Data not being looked at in the whole and just a
few elements being picked out to prove a point. Articles from left-wing
newspapers and left-wing think-tanks being quoted as unbiased facts. The
fact is that the financial system has not been fixed since it was
revealed to have been broken in (or long before) 2008. That interest
rates are still very low and will probably go even lower. Not just in
the UK but throughout the world.
We have only to look
at Japan to see decades where there have been deflationary periods and
constant low interest rates. Brexit was an excuse to let markets find
their own way (rather than banks manipulating indices as they have been
shown to be) and if the suits can scare people into changing their mind
about Brexit then that is just an added bonus.
Nothing
has been fixed since the crisis of 2008 and there is probably more
financial turmoil to come and little of it the fault of the UK.
Government debt continues to rise. The world continues to live beyond
its means. Bankers continually create new exotics to gamble with in
their casino masquerading as a market. The markets love volatility
because that increases volume and more volume means more commissions for
the bankers. For a banker, a chaotic market and a controlled population
can only be good.
You must understand the whole
picture before using a subset of data to confirm an incorrect
hypothesis. Do not start with a conclusion and then fit data to create a
false hypothesis. A trader should look on volatility with a positive
mind and should not be deviated from opportunities by biased data or
biased thought. One person's error is another's opportunity. As Liberace
once said, "I cried all the way to the bank."
