Wiser Readers,
Predictions Gone Bad: 2011
Hall of famer Tris Speaker once predicted: "Taking the best left-handed pitcher in baseball and converting him into a right fielder is one of the dumbest things I ever heard." He was speaking of Babe Ruth.
The media is full of predictions, no more so than with finance and investing. But this has more to do with captivating an audience than educating it.
Of forecasts Warren Buffet states, “a prediction about the market tells you nothing about where it is headed, but a whole lot about the person doing the predicting.” That is to say, an "expert's" prediction should be interpreted as a guess, while his level of optimism or pessimism can be precisely determined. Note the following examples:
The Worst Investing Predictions of 2011
Prediction 1: China would be the best place to invest. Result: China underperformed the S&P 500 by 19%. It even underperformed the EAFE index which includes slammed European stocks. Oops.
Prediction 2: Inflation would spike subsequent monetary and fiscal stimulus. Result: Just didn’t happen. Oops.
Prediction 3: Interest rates would rise dramatically. Result: Instead, The 10-year Treasury rate dropped almost in half. Bill Gross, widely touted as “The Buffet of Bonds” issued a formal apology to his investors for being so wrong. Oops.
Prediction 4: Municipal Bonds would default en-masse. Result: Muni bonds were one of the best performers over the period, one benchmark logging 9.6% for the year. This prediction was so dramatically incorrect it will go down with Business Week’s forecasting “The Death of Equities” in 1979 as one of the worst predictions of all time. Oops.
Prediction 5: The price of gold will continue to soar, many stating $2000 per ounce* was a “given.” Result: Gold did top $1800/ounce during the year, but fell back closing around $1550 at year end. Oops.
Prediction 6: Energy prices would soar. Result: Oil prices did increase from $99/ barrel to $107 at year end, but prices at the pump weren’t dramatically affected. Natural gas plummeted from $4.50 to under $3.00, its lowest price in 2 years. Oops.
Prediction 7: And the worst prediction of 2011…drum roll please…
2011 would prove to be a stock-picker's year. Result: Approximately 11% of active managers beat the Russell 1000, a typically dismall 1 in 10 result in any one year period. More telling, the average active growth manager underperformed the Russell Growth Index by
4.5%! Ooooooooops. But no worries, the media remains undaunted. Without consideration of financial affect on consumers that act on what is little more than a matter of opinion, media continue to proliferate the crystal ball gazing of countless investment swamis.
At Wiser we encourage you to remember a guess purports one outcome against many other possibilities – each having an equal chance of occurring. Go with the odds. The market will be right far more often than those guessing at it.
In the meantime, be sure to get in touch if you have questions or concerns about your investment strategy.
I welcome your questions and comments.
becker@wiserfinancial.com Marc Becker, AIF
Managing Partner, Wiser Financial Coaching
Columnist, The Advisor Sherpa
If you want to read more about predictions and sources for this data:
Click Here *If you want to read more about gold price predictions in 2011:
Click Here
Golf Tip of the Week Putt Like a Piston To me, the putting stroke is basically a right-handed action. I swing the putter back with my right hand, and I swing it through the ball with my right hand. All my left hand does is serve as a guide to steady and stabilize the stroke.
Visualizing my right forearm working like a piston is an image that helps me in using my right hand correctly throughout the stroke.
To "see," set up for, then sense the piston-like motion, I need to bend far enough over the ball to position my right forearm horizontal to the ground, or fairly close to that alignment. The set-up also requires positioning the palm of my right hand so that it looks squarely at the starting line of the putt. The feeling I then seek during the stroke is simply one of my right forearm pulling back and pushing through like a piston.
If you're not putting as well as you like, try this piston "picture" and motion.
Source: http://www.nicklaus.com/nicklaus_golftips/
Trivia Time Hi Wiser Readers:
This week's question: What is the maximum capacity of the largest passenger ship currently in service?
Do you know? E-mail your answer wendy@wiserfinancial.com and if you are correct, receive a free "Way to Go!", "You Rock!", or other congratulatory phrase. Then brag to all your friends about how smart you are.
The answers will be in next week's newsletter!
Last week's question: January is named after what Roman god?
Answer: Janus.
Congratulations to David R. and Richard W. for getting the correct answer! Big applause!
Source: www.wikipedia.org
No comments:
Post a Comment
To Leave a Comment Choose The Name/URL Drop Down. You Do Not Have To Enter A Website Just Your Name