Un-Prophet-Able Investing: Financial Advisors' Daily Digest

by: SA For FAs


Jeff Miller's valuable survey of the week ahead includes calling out a serial false prophet.

Eric @ SERVO calms fears of loss for long-term investors.

JP Research sees Trump taking the Fed in a hawkish direction.

Honor is due to Jeff Miller for his "Silver Bullet" award, given to journalist Jacob Wolinsky for calling out a string of wrong predictions by Harry Dent. (Jeff thought he was honoring Jacob Wolinsky, but recognition is also due to someone who goes out of his way to recognize the contributions of others!)

Economics has a long way to go before it hardens into a science, and "economists," as Dent describes himself, do their profession no honor by making stark predictions. Wolinsky's article shows one of Dent's charts displaying a cataclysmic market drop in April of last year. That was supposed to be the "first big crash likely just ahead." Wolinsky dredges up other Dent predictions of "historic" S&P drops to 6,000 and then 3,000 at various intervals over the past several years. But as is all too clear, these were not historic in the sense of actually having been a part of history.

Among my favorite Dent quotes in Wolinsky's article is "I'm getting one sign after the next that we did indeed peak last May." That sounds more to me like soothsayer than sage. It plays to an apparently large demand out there for people desperate to know the future. Because, if they knew the future, then they could make a lot of money! But nobody knows the future, people. It's truly foolish to be looking for that kind of "information." And as for those who peddle it, you're hurting people! And that's not nice.

Investors need to understand the difference between an intelligent analysis that offers guidelines, principles, trends, even warnings, on the one hand - and predictions stated with near certitude, which is unobtainable in the realm of economics. There are too many variables and too many unknowns. By all means, we can and should look at market history or investing principles and apply them to current circumstances. But reading signs as a prelude to predictions is in the realm of prophecy. The surest sign that someone is not a prophet is having made even a single, small mistake.

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