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“Not So Amazing” Carnac

Published by: Lytle Rather, CFP®,AIF® Date: January 20, 2013

As a young man, I remember staying up late and watching Johnny Carson. I always enjoyed his “Carnac the Magnificent” skit where he would hold a sealed envelope to his temple, give an answer, and then open the envelope and read the question that corresponded to his earlier answer. Ed McMahon would introduce him with the following statement, “I hold in my hand the envelopes. As a child of four can plainly see, these envelopes have been hermetically sealed. They’ve been kept in a #2 mayonnaise jar on Funk and Wagnall’s porch since noon today. No one knows the contents of these envelopes, but you, in your borderline divine and mystical way, will ascertain the answers having never before seen the questions.” It was always entertaining and most of the time funny.

The pundits made some poor attempts at Carnac-like predictions in 2012:

The Fiscal Cliff. What major economic event did not cause the stock market to crash?

12/21/12. What was the date we didn’t disappear from the face of the earth?

Up. What direction did interest rates not go in 2012?

These predictions also fell into the same category- entertaining and some funny. Trying to predict how any social, political, or economic event is going to affect the investment markets is a guess. The problem is, with enough people guessing someone will always be right and they will be touted as an expert. The fallacy in this logic is that you cannot predict who will be right before the event happens- only after.

When planning for our future, we should not build our plans on a guess. We should get a realistic picture of where we are: how much money we’ve accumulated and how much money we can consistently save. We should have a clear vision of where we want to be, how much we want to spend, and how much investment risk we should take. The plan is built around the gap between where we are and where we want to go. Factors such as who the president is, what Congress is doing, or what is going on in Greece should have little bearing.

I met with people in 2007 that were uncomfortable with the 80% stock exposure their “money managers” had implemented in their portfolios. When they questioned their allocations, those same “money managers” arbitrarily reduced their exposure by 10%. Why? What was this reduction based on? There was not a good answer. It was a “Carnac the Magnificent” style guess. What solution would I offer to stay away from these guesses?

• Discuss your goals and dreams with a fiduciary advisor.
• Commit to the time and energy necessary to develop a financial plan that gives you a road-map to meet your goals.
• Resolve to expose yourself to the least amount of risk needed to meet your goals.
Only through intentional planning can you find the peace of mind that allows you to focus on what matters most to you. The next “Carnac the Magnificent money manager” isn’t the answer to your question.

Predictions. What should we ignore and never base our decisions on?

Lytle Rather, CFP® is co-founder and President of Rather & Kittrell. He is available at