If you kicked off 2015 by rearranging your portfolio for the “impending interest rate hike”, you were really early – like eleven months early and counting.
Well, in twelve days you’ll know if it was worth it because that’s the last Fed meeting for 2015.
Now, before I go further, it’s fair to point out that few people expected rates to go as low as they did. Even fewer thought it would last this long. It’s probably fair to say that even less people think rates will stay low much longer.
You can count me as was one of the many who were wrong each step of the way. The good news is having an opinion only costs you when you bet money on it, which I didn’t do.
All of this goes to show that trying to predict interest rate hikes is silly. Basing investment decisions on what the Fed might do is sillier.
I ran across a Buffett interview from sometime earlier this year. It just happened to be about interest rates. Of course, Buffett had his own opinions and freely admits he’s been wrong too:
I think bonds are very overvalued…The central bank has the capacity to keep them in that situation almost indefinitely.
Based on that, trying to predict when, how much, and how soon it happens again seems like a big waste of time. (Shot in the dark says indefinitely is slightly longer than what really happens.)
For argument’s sake, let’s say you’re really good at predicting things. So your educated guess turns out to be right. Now what? Being right brings with it a bunch of other things you then have to be right on too, including how other investors react.
As Buffett later states:
The important thing in economics, people forget it, is you can never just do one thing. It’s like physics. You cannot just change one variable and not have anthing else change in the world.
- History Shows ‘Slow and Steady’ Is Best Rates Mantra for Stocks – Bloomberg
- The Emperor of All Strategies – M. Housel
- The Persistence of Growth – Investor Field Guide
- Would You Let a Mystic Manage Your Investment Portfolio? – Washington Post
- Good Luck With That Forecast – M. Housel
- The Revolutionary Idea That Being Rich Isn’t the Point, Having “Enough” Is – Quartz
- T. Boone Pickens talks Energy, Security and Shop with Carl Icahn (video) – Youtube
- Private Equity’s Paper Tigers – Fortune
- The Race to Create Elon Musk’s Hyperloop Heats Up – WSJ