We live in a world where many people make predictions about the future. This certainly includes predicting financial markets and their returns. Is this something we should focus on or should we totally ignore it or is there some space in the middle there? This month we will take a nice long look at a few psychics who seemed to think they knew the future once upon a time.
You can turn on your favorite business channel and see all kinds of people predicting what the future will hold. There is bad news. There is good news. And then, there is just a lot of noise. Let's see some predictions from people in the past and how those predictions actually played out in real life. P.S. Anyone can predict a market direction correctly if you wait long enough for the market to turn.
The well respected and renowned economist Irving Fisher stated unequivocally that "stock prices have reached what looks like a permanently high plateau... I expect the stock market to be a good deal higher within a few months." This statement was made days before the market crashed in 1929. His lack of humility made him look like a fool and he never recovered from this ridiculous statement.
Economist Ravi Batra wrote a book, The Great Depression of 1990. It sold millions all over the world and became a bestseller. It stated an economic crisis was imminent and you had better prepare yourself for really bad times to include the stock market. The U.S. stock market averaged 18% throughout the 90's as the internet changed the world. Here is another economist that was terribly wrong.
The Federal Reserve Chairman at the time, Alan Greenspan, released a memoir, The Age of Turbulence: Adventures in a New World, where he predicted very high interest rate spikes over the next few years as inflation ran wild. One year later the Federal Funds rate was at historical lows and went lower from there. Clearly the man with all of the current data cannot predict the future.
Financial prognosticator Peter Schiff predicted economic catastrophe year after year following the 2008 real estate debacle. Here is a video from Mr. Schiff on October 6th, 2010. I will summarize for you. The world is going to hell in a hand basket so you better pile up on Gold and listen to every word I say. The reality is that decade was a GREAT decade for the stock market. Another psychic bites the dust!
How about a prediction on the Internet and its impact on the world and the financial markets? Nobel laureate Paul Krugman said this in 1998, "The growth of the internet will slow dramatically, by 2005 or so, it will be clear that the Internet's impact on the economy has been no greater than the fax machine's." He was absolutely wrong in a very big way. The Internet has dramatically changed the world.
Robert Kiyosaki is a charlatan who has been making wrong predictions for a very long time. Back in 2016 he stated for all the world to hear, "2016 will bring the worst market crash in history." The market went up over 12% that year and over 100% since then. He continues to predict Armageddon, hoping that he will be right one of these days. Stop listening to this soothsayer. See how he scares you here.
Business people running the largest companies in the world think they know the future much of the time. They don't! Let's see what what the CEO of Microsoft, Steve Ballmer, stated once upon a time. He said, "There is no chance that the iPhone is going to get any significant market share." This would end up being one of the worst calls of all time. He probably should have stupid written on his forehead when you said it.
Let's do one more as we complete this analysis of psychics. How about Jim Cramer? This moron is still on television even though he has gotten more wrong than right over time, costing many people a great deal of money who actually do what he says. This video is just one of many examples of very bad "advise." You would be better off doing the opposite of what he actually says!
Could I go on and on with more examples of people who predict the future and get it terribly wrong? You're damn straight I could, but I will try not to bore you any further. The bigger question is, what are we to take from this matter? 1. Do not listen to anyone who attempts to predict the future. 2. Do not listen to "your gut" as you see the future playing out. 3. Accept the reality of a random future unfolding.
Here is the broader message that you can take away. Once you let go of this idea that some person, politician, business person has the answers to the future, we can start taking control of our own future. We educate ourselves from the right teachers and we invest wisely in a diversified portfolio of low cost index funds or ETFs in and outside of retirement accounts. Then, we keep feeding those funds.
Let's wrap it up. You are not a psychic because you predicted something correctly 6 years ahead of time. That can be luck or just the basic rules of a capitalistic society that will have its natural ups and downs through business cycles with a few bad actors along the way causing damage. Ultimately, it will be your skepticism of the psychics that will take you down the right path. Beware of psychics!
