…to start forecasting equity markets using these metrics is a perilous thing. And it’s becoming all the rage lately.

The problem with demographics as equity market forecasters is that, first, in order for you to be right, you might have to wait, you know, a generation or more. Also, even if you can shoehorn a theory to explain all, at best you only have a few good data points to support the correlation tied to equity markets. That’s not much to stake a +20 year forecast on.

Here’s some interesting psychological research as to one reason that may be: Yesterday came suddenly

“Because future events are associated with diminishing distance, while those in the past are thought of as receding, something happening in one month feels psychologically closer than something that happened a month ago.”

Unreliable neuroscience? Why power matters – Suzi Gage

In a paper published today in Nature Reviews Neuroscience we reviewed the power of studies in the neuroscience literature, and found that, on average, it is very low – around 20%. Low power undermines the reliability of neuroscience research in several important ways.

CARMINE INFANTINO (1925 – 2013)

I admit—freely—often my biggest hang-up with Ms. Rand was that she’s too pure, too idealistic, advocating a worldview not possible in this world. Charles Johnson’s recent IBD piece puts such anxiety to rest.

“My personal life is a postscript to my novels,” she wrote in the afterword to “Atlas Shrugged.” “It consists of the sentence: ‘And I mean it.’ I have always lived by the philosophy I present in my books — and it has worked for me, as it works for my characters.”

Happyism by DEIRDRE N. MCCLOSKEY

This stuff is worth being aware of because it’s popping up in political discourse regularly. In particular, note the creeping paternalism lately becoming a full infestation in behavioral economics.

“In 1984, the average U.S. household spent 16.8 percent of its annual post-tax income on food. By 2011, Americans spent only 11.2 percent. The U.S. devotes less of its income to food than any other country—half as much as households in France and one-fourth of those in India.”

In the words of Stan Lee, ‘nuff said.

Now that it’s Q1 2013, this ought to be stunning to many pundits. Just as global equity markets’ resilience and lack of European meltdown has astounded many investors, too.

Embattled Economies Cling to Euro By MARCUS WALKER and ALESSANDRA GALLONI

Graphic from the Wall Street Journal.

Regulator, Go Slow on Reining in High-Speed Trading: Algorithm-driven trading appears to be self-correcting. That’s good—the hyper-fast world needs it.

By HOLLY A. BELL

The Dodd-Frank regulatory overhaul sought to reduce risk in the swaps market in part by having as many as possible trade on an exchange where prices and volumes are posted, as well as having trades settled by central clearinghouses that guarantee payments. The CFTC began writing new rules after Dodd-Frank passed in 2010. The rule that took effect in October requires that any entity trading more than $8 billion of swaps a year—whether a financial company like a bank or a hedge fund, or a “commercial user” like an airline or a shipping company—be considered a swaps dealer and be subject to government audits and higher capital levels.

That prospect didn’t sit well with many market participants, including those who were buying and selling swaps on an electronic trading platform run by the IntercontinentalExchange (ICE). Prompted by its customers, ICE took all the energy swaps that had been trading on its electronic marketplace—more than 900 contracts—and used them to create futures contracts that could trade on its futures exchange. So now, instead of creating a customized swap with another trader, an airline that wanted to lock in the price of 1 million gallons of jet fuel at a certain date would buy jet fuel futures contracts created and managed by ICE.

From Bloomberg BusinessWeek’s: This Is What Unregulated Swaps Look Like

Unintended consequence alert! Knowing exactly how swaps would adapt around this kind of thing would be next to impossible; but knowing that they would in fact adapt was possible.

In an increasingly technocratic, “if I pull this lever the economy will do X” type of world, it pays more than ever to read the free market wisdom of Thomas Sowell. Now considered an economic classic, his Knowledge and Decisions is a must read. Known for his clarity of thought and cogency of words (Sowell is an accomplished writer), Knowledge is uncharacteristic of Sowell’s later works—often turgid, plodding, redundant, and overly long. This is more academic exuberance than pithy communication. But the gold is there, and a must read for those pondering how decisions will be made as the world of Dodd-Frank arrives.

“If politicians stopped meddling with things they don’t understand, there would be a more drastic reduction in the size of government than anyone in either party advocates.” – Thomas Sowell