Steps to understand the “Noise” – from “WHEN MARKETS COLLIDE”, Mohamed A.El-Erian

” Understanding “noise”

1. Identify the source of the noise that creates an unusual market dislocation

2. Be disciplined in treating each episode of such noise as potentially containing important signals

3. Assess the actual signal content through an evaluation based on the a priori modeling of the economic or market phenomenon

4. Differentiate between factors that influence the destination and those that influence the journey when assessing the content

5. After you have gone through this process, and not until then, you should actively pursue the views of the experts and the talking heads

6. Be open to finding not only cyclical influences but also secular ones


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