There is no future in
making Predictions
Or following the predictions of others, I may add. Like the
kid in the candy store who just wants to grab, the average investor
wants to know what is going to happen in the unknowable future and the financial media knows it. So in
their own self-interest of increasing their audience (advertising
dollars) they feed this demand with a never ending supply of predictions. Short
term, medium term and long term, it doesn’t matter as long as it’s a forecast.
The predictions are never followed up on, because there are
too many future forecasts waiting in the wings. Of course they are
almost always wrong but it doesn’t matter. So insatiable is the public’s
appetite for these prognostications they don’t care about the result, they only
want more of them. It’s really a fascinating
social phenomenon. Sure some forecasts turn out to be accurate but its just randomness. Like the economist who predicted 7 out of the last 3 recessions.
Then there are the predictions an individual makes for himself. Welcome to the land of 'confirmation bias'. The investor will only read or agree with opinions that are in unison with his own ignoring anything that counters his point of view. This is largely because of the investor's ego which wants to be proven right so it can thumb its nose to the rest of the world. Beware the ego, the market will feed on its foibles and will eventually crush it. Be humble and dispassionate if you can and make no predictions about anything because part of your ego will always be attached to it.
Well wait a minute I hear you say. What about investing in a growth stock? Don't some investors run a 'Discounted cash flow' analysis to get a handle on the future cash flows of a company? I've never done this but from what I've read there are so many variables that go into the process that it ends up being like the Hubble telescope, you turn it a fraction of an inch and you're in a different galaxy.
Many investors are numbers orientated and approach investing from a left brain point of view (deductive). They are prone to believe in the precision of their numbers and make forecasts thereof. I approach investing more from the right side of my brain (inductive). I'm not a numbers guy but you can't invest without using them. I'm just saying I look at numbers to put me in the ballpark, not into my seat.
Then there are the predictions an individual makes for himself. Welcome to the land of 'confirmation bias'. The investor will only read or agree with opinions that are in unison with his own ignoring anything that counters his point of view. This is largely because of the investor's ego which wants to be proven right so it can thumb its nose to the rest of the world. Beware the ego, the market will feed on its foibles and will eventually crush it. Be humble and dispassionate if you can and make no predictions about anything because part of your ego will always be attached to it.
Well wait a minute I hear you say. What about investing in a growth stock? Don't some investors run a 'Discounted cash flow' analysis to get a handle on the future cash flows of a company? I've never done this but from what I've read there are so many variables that go into the process that it ends up being like the Hubble telescope, you turn it a fraction of an inch and you're in a different galaxy.
Many investors are numbers orientated and approach investing from a left brain point of view (deductive). They are prone to believe in the precision of their numbers and make forecasts thereof. I approach investing more from the right side of my brain (inductive). I'm not a numbers guy but you can't invest without using them. I'm just saying I look at numbers to put me in the ballpark, not into my seat.
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