by James Rickards
Daily Reckoning
Not a day goes by without some pretty significant developments in the markets. You should not react or overreact in a knee jerk fashion to each piece of data that comes out. You’ll just end up getting whipped around.
What you need to do – what analysts and investors need to do — is have a thesis to guide them. Don’t pick one at random, but have a well thought out thesis. Then use the data to test that thesis. There’s a name for this: it’s called “inverse probability”. You use subsequent data to test your original idea.
That method is is different from a lot of science where you actually get a bunch of data and then you come up with an idea. Here, however, you have an idea and you come up with data to test it. There is no better way of approaching the markets because nobody has a crystal ball.