Welcome to the end of the week and another edition of Happy Hour! Just sit back, relax, and enjoy your end of the week roundup of all things interesting in the land of money.
Looking Back
Every year, a bunch of people release their forecasts on the new year. It starts around now and trickles in through January. Some are doing it to make a name for themselves. It’s the ultimate hype machine for anyone with some wild and crazy predictions.
For this reason, there is a growing number who poo poo the very idea of predictions as a useless waste of time that only confuses people. That’s true for anyone who actually believes these predictions to be true. Most of the time, far too much weight is given to these forecasters because of the name behind it. The big name financial company, analyst, or economist is almost always more wrong than right. That was the case again this year.
The problem, of course, is the time limit and far too specific responses. I’ve got a 50/50 chance of forecasting whether the market will be up or down next year. Once I start throwing out percentages, my odds of being right decrease dramatically. Add the time limit and I’m down to blind luck.
So why would anyone base their investment strategy on a 365 day window, then, come January 1, change everything to fit what some “expert” believes might happen in the markets during that period? See how ridiculous that sounds. The markets don’t stop and start anew with each changing year. Your strategy shouldn’t either.
The way around this is to only forecast things that have a high chance of becoming true. But, again, that won’t feed the hype machine. We don’t like obvious. We like crazy, the crazier the better. It’s entertaining. Hey, it works for reality TV.
Predictions aren’t anything new around here. Though, I’ve slowly moved toward pointing out what’s most likely to happen. Timing is the most elusive of the process and I suspect it always will be. It’s far from the shock and awe forecasts that make headlines. And I’m okay with that. I do it to better understand the great unknown of the markets. Maybe it’s to improve my flawed thought process. That, and I can relax a little with a fun post to end the year.
Last Call
- Six Investment Errors You Are Making Right Now
- Bubbles: No One Has Any Idea What’s Going On
- Market Risk And A Fear of Flying
- Your Guide to the Volcker Rule
- Warren Buffett’s Meeting with University of Maryland MBA Students
