Thursday, March 04, 2010

Remember: Rumors Aren't Reliable

The extent to which markets are driven by baseless rumors is illustrated by the panic about Greece.

In addition to many other inaccuracies, rumors that some form of EU bailout for Greece is imminent have hit us at least three (I might have missed some additional cases) times:

From February 11

From February 23

From February 28

Yet ultimately, in all three cases the rumors turned out to be false.

While it remains a possibility (though it looks increasingly unlikely) that a bailout will eventually come, the point is that you shouldn't trust press reports citing "anonymous sources". As that could be anyone (including even the journalist in question making it up. Since he could always claim that he simply "protects his sources", how could pure fabrication be proved?), it is clearly not reliable.