The wisdom of crowds and government bond markets

Recently I have been making statements about bond markets of the “markets are saying…” variety, that attribute firm economic insights to the chaos and divergent individual viewpoints that make up our credit markets. As a big believer in the wisdom of crowds I want to explain why.
Back when I was in business school, Michael Mauboussin, who taught a class with a lot of insight on behavioural psychology in markets, became one of my favourite teachers of all time. He was that good. I remember in one of his classes when he paraded a jar of gumballs around. He asked us to each guess how many gumballs were in the jar, and write our guess down on a scrap of paper. Maybe we were supposed to win something if we guessed right. I’ve forgotten now. But after we were done guessing, one of the students ...

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