The world of finance is liberally peppered with gurus. Jim Rogers is one example – he believed with all his heart that China was the next big thing, to the point that he moved to Singapore and his little daughter learned to speak fluent Mandarin, leaving Chinese listeners dumbfounded. And how many gurus predicted the 2008 Sub-Prime Crash? Not long before that collapse, I was invited to participate in a panel of economists at a well-known university.
First, the chief economist of a large bank spoke, followed by the CFO of another bank. Both offered solid forecasts: the housing crisis is no more than a simple passing episode, the economy is strong, and there is no danger of crisis in the capital market. In short, a message of “Don’t worry, all is well.”
Dumping Cold Water on Blind Predictions
I'm used to the idea that someone receiving a salary from the bank would not try to frighten the public or drive investors away, but this was over the top. When it was my turn to address the audience, I said very simply, “I don’t know what will happen.” The moderator persisted, admonition coloring his voice, “We brought you here to tell those present what they should do.” So I told the truth, and one which will surely mean that that university will never invite me again to lecture there. This is what I said: “Don’t listen to analysts, because they have no idea about the future.”
From the reaction of the moderator and the public, I had clearly touched a sensitive spot. The public likes to be told what to do. It likes to be taken by the hand and led, whether to slaughter or splendor – but it does not want to be burdened with the commitment of having to make its own decisions. At this stage of a clearly-explosive atmosphere, I added, “Don’t let bankers and funds manage your money, take management fees and commissions, and then tell you ‘it will be okay.’ The truth is that just like me, they have no idea what will happen in the future.”
Remember: No one can predict the future of the market or any stock. For every opinion presented by a renowned analyst, we can find a contradicting opinion by an even more renowned analyst. No matter whom the guru is, or whether he or she takes the form of an investment advisor or analyst, when you read or hear any kind of recommendation in the media, don’t lap up those words without careful consideration. Analyze them critically, and recognize the fact that even if they are correct, they are known to millions of people…leaving you with no advantage.
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