2012

“Tis the week before New Years and all through the land,

Crystal Balls have been polished to lend us a hand.”

Yes, it’s that time of year and the annual forecasting ritual is well under way.  The brokers, the money managers, the financial publications are all making their forecasts regarding which stocks to buy, the best mutual funds for the coming year etc. etc.  And why shouldn’t they?  Most investors view forecasts as “investment advice.”  But sadly it is not and these forecasts are virtually worthless.

Another annual ritual will take place at the end of the year—the regrets and apologies ritual.  “Sorry, we didn’t get it right because we didn’t anticipate this or we didn’t anticipate that.”  But isn’t that the definition of the future—unanticipated events.

Every investor would love to know the future, a guarantee of success.  But it’s just not possible.  Yes, out of all the “experts” making forecasts, some will be right.  And they are the ones who will be listened to at the beginning of 2013.  At the end of every race, we know who won but that is of little value.  That’s why you see the small disclaimer at the bottom of the ads, “past performance is no guarantee of future results.”

A few years ago, while in Australia, I went to the track with my friend Jill, to try my luck at picking winners.  We were all dressed up for the day, as is the custom in Australia, and it was a truly fine day.  The first race was 3 minutes from post time so to get the fun started we decided to wager $50 on a horse that was going off at 85 to 1.  As we drank champagne, our long-shot filly came from nowhere to win by a nose.  As the paymaster counted out our $4,000 plus winnings, we attracted quite a crowd and my first thought at that moment was, “these folks believe I’m an expert.”  I could easily sell all of them a subscription to a newsletter on how to pick winning horses.

It’s no different investing in the financial markets, the lucky “experts” get all the publicity for the coming year and the annual rituals continue.  They are a fundamental part of the marketing strategy of the Financial Services Industry.  That’s the bad news for investors. The good news is, you don’t have to participate.

Have a fantastic 2012, count your blessings and remember it’s not always about the money.