Prognosticators, Pigskins, & Pundits
Recently, I stepped out for a run on a Saturday morning and you could feel Fall in the air. When I returned to the house, I could hear the familiar sound of my wife and kids upstairs playing and singing. This particular Saturday morning was different than most others because I instantly recognized they were singing Rocky Top as loud as they could (minus the woo, thankfully). Yes, it’s that time of year, and if you live here in East Tennessee football season is a way of life whether you like it or not. As the weather gets a little cooler, the experts get a little louder, the football fans get a little warmer and the expectations grow more diverse. All of which sound eerily similar to financial media except that football is seasonal and financial speculation is year-round.
Think about this: How many times have you heard a sports analyst say, “I don’t know?” Probably about as many times as someone in finance says “I don’t know.” Opinions and predictions pay the bills and there’s nothing that deflates drama more than someone being honest and admitting that they have no idea. Listening to sports prognosticators doesn’t typically come at much of a cost other than your sanity. However, listening to the alarmist stories of financial services pundits can cost you in commissions, risk, and eventually drifting from your financial goals. With so much financial programming out there now, we unknowingly could begin to view the economy and capital markets as entertainment.
Thankfully our society is catching up with the evidence and is growing increasingly skeptical of these stories. Consider the pace at which pension plans across the country are choosing not to fund the Wall Street charade and instead are replacing their hedge fund managers with low cost, broadly diversified index funds. Maybe the willingness to say “I don’t know” is becoming an endearing trait. After all, if someone can’t confess to not knowing, then they must be able to:
• Predict what will happen
• Predict why it will happen
• Predict when it will happen
• Predict what the implications will be
• Predict how long it will last
Outguessing the fast-moving capital markets is challenging, if not futile, and the evidence proves that no one can consistently invest successfully based on earnings, currency devaluations, interest rate predictions, economic forecasts, China, Greece or anything else that occupies the news.
As football season begins, remember that the game is played for a reason. The fun is in the uncertainty and the return is in the outcome. When it comes to investing, though, the uncertainty can be a real risk to your portfolio and reaching for return based on predictions can be detrimental to your financial future.