Most of us believe that we have special powers—that we can predict the future better than others.
But we have a problem—the future does not exist. It has never existed and will never exist. It has not been created yet, and before it can arrive the present moment will swallow it up. A black cloud of nothingness exists where we expect to find the future.
Wait a minute. We know that a falling ball will hit the ground, that the hands of a clock move in one direction, that the sun will rise in the East and set in the West, and that the hot stock we bought will rocket to the top.
Not so. We have only probabilities. We live in a world of probabilities, and we project those probabilities In our mind we see, not the future, but those projected images.
Step 1. Pick a handful of probable futures.
So, instead of believing that you can see The (one and only) Future, and that if you study hard enough and think long enough, that you will uncover a sure thing; instead of that, try to imagine multiple futures, full of endless probabilities. Run them through your mind, study, think, and test—and then pick out a few probable futures, the ones that seem more likely than others. Remind yourself often that these are only your guesses, and that none of them are certain to happen. And remember, that like a dream, these images do not have the detail and substance of reality. One small fact, hidden or misunderstood, can result in a very different outcome. Be aware of how little you actually know and understand. Stay very humble.
If you do this you will not waste time getting upset that the market is wrong. You will not wait for a future that will never come into the present. Instead, you will modify the multiple futures you have imagined and stand rested and ready to move if and when the time comes.
Step 2. Decide what you will do if one of your probable futures rolls into the present.
Remember the Boy Scout motto—Be Prepared.
For each future that you have imagined, have a plan for what to do. Buy? Sell? Hold? Let’s look at some examples.
a. Israel attacks Iran to destroy its atomic weapons manufacturing facilities. Will it happen? I don’t know. But if it does, I expect oil to spike upward. Response? I would sell my oil stock, and if I were bold, use some proceeds to buy stock in Israeli companies.
b. The price of smart phones and data transmission and storage fall far enough that everyone switches from cell phones and laptops to mobile smart phone computers, using cloud resources to store data and applications. If this begins to happen (has it already?), I would buy smart phone and cloud computing stock, and then sell after it bubbles, if it does.
c. Food riots lead governments to hoard food for their own citizens, leading to greater shortages, higher prices and a potential for more riots. The cycle speeds up and the news media pick up the theme, accelerating events. Food prices increase. What will happen? Government responses to a food crisis could massively affect agriculture investments, so you might want to imagine what governments will do (help each other? war?) and then image different scenarios and be prepared to buy or sell ag stocks if any of them occur.
d. The world economy recovers. If this happens, investors might exit the low yield US bond market for other investments. Possible result—increasing long term bond rates, and a potential US bond crisis. Usually in a financial crisis investors move into US treasuries or gold, but in this scenario US debt would be part of the problem and not a solution for scared investors. Where do you run to in a storm if your own house is on fire? With so much scared money chasing a small amount of gold it could spike upward quickly. Response? Sell gold, and if bold buy some long term US debt when the interest rates are high.
There are endless scenarios, infinite possible futures.
An additional consideration—image what you will do if none of your imagined scenarios happens. Some investments may do well, even if none of your projected futures happen. For example, gold and oil, may work well as long-term investments even if Israel never attacks Iran and even if the US never has a bond crisis. Keep aware of the state of the world as it changes, and at some point consider abandoning a projected future as no longer likely. In such a case, you may need to reconsider your investments.
Disclosure: among other positions, presently long commodity, cloud computing and smartphone stock, short US long bonds