Second verse, same as the first! Well, maybe you’ve been hearing this from me for a few years now. What’s the market outlook for 2022? I’ve got a hot take for you in this week’s video.
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As humans, we sometimes have trouble visualizing that which is not yet in existence. Back at the dawn of personal computing, when some were predicting that most homes would eventually have a computer in them, a common question was, “Why would they?”
People just struggled to imagine all the uses that would emerge.
Later, after the wonders of cable television spread across the land, talk of a new kind of communication technology arose—sort of a two-way or interactive television. These earliest visions of the internet were also met with dismissal, as people wondered what good that would be.
The lesson in this history? It may be that we are only ever scratching the surface of the potential capabilities of emerging technologies. There are many things on the horizon: ubiquitous internet access across the globe from low Earth orbit satellites, 5G and 6G and ever-faster connectivity, cloud storage of software and data at ever-decreasing prices, the “internet of things,” virtual reality and augmented reality, electronics in more and more devices… and much more.
The possibilities thrill us.
In our research, we assume that it’s beyond our capacity to foresee all the applications on the way, but we also believe that perhaps their ramifications can be guessed at. For instance…
So instead of pretending we can predict that unimaginable future, we strive to understand the structure of related industries and how these relationships might develop. Then we determine which established companies may benefit, and we’ll try to identify emerging companies with key technologies.
Then, we sort this out into what is investable, and we manage portfolios in keeping with this background. We don’t predict the future; we imagine some probable possibilities.
Clients, if you have some insight that might help us, or want to talk about this, please email us or call.
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Play the audio version of this post below:
It is that time of year! Prognosticators and pundits issue their forecasts for the year ahead. Wouldn’t it be nice to know what the future holds? Some forecasts are hedged and don’t really say much. Our prediction is quite specific.
For those who have visited our offices, you know that we actually do have a crystal ball. It forecasts the direction of the stock market for the coming year. It does not say how far the market will go, but it always predicts the direction.
If you knew which way the stock market was going to go, could you make money investing?
Here’s the catch: our crystal ball has only been 74% accurate. So perhaps the question should be, “If you knew which way the stock market was going to go 74% of the time, could you make money investing?”
Without further ado, here is what our crystal ball says about the direction of the stock market for the year beginning January 1: it will go up.
Long-time observers will not be surprised. The crystal ball always says the market is going up. It has never predicted a down year. And checking back over the past hundred years, according to Standard & Poor’s, it has been right 74% of the time.
We don’t know how well its track record will hold up, but we believe this presents a favorable backdrop to buy bargains, avoid stampedes in the markets, and seek to own the orchard for the fruit crop. In other words, to keep on keeping on, following our principles and plans and strategies. And remember the long haul sets its sights beyond the coming year.
It is tempting here to include a discussion of the economy, the strengths and weaknesses we perceive. We’ll leave that to people with more time on their hands. If your plans are evolving and deserve some attention in the new year, please email us or call.
Cheers to 2021, friends.
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This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes.
Investing involves risks including possible loss of principal. All performance referenced is historical and is no guarantee of future results.
Any economic forecasts set forth may not develop as predicted and are subject to change.
When you watch the news and the weather forecaster tells you there is an 80% chance of rain tomorrow, what exactly does that mean?
It might rain tomorrow, or it might not. It says rain is more likely than not. So if there is no rain after all, does that mean that the forecast was wrong?
Forecasting is often a fuzzy subject. No one can see the future with 100% certainty, so predictions are often spoken of in terms of probabilities. But we as humans are generally not good at thinking in terms of probability. An 80% chance is far from a sure thing, but when someone tells us something is 80% likely to happen, it can sometimes feel like one.
This is particularly true when it comes to trying to predict one-time events. If you flip a coin and it comes up tails, you can keep flipping it and see that it will still come up heads about half the time. If the weather forecast says there is an 80% chance of rain next Tuesday, there is only one next Tuesday. If Tuesday comes and goes without any rain, it sure feels like the forecaster blew it.
Economic and financial forecasting runs into the same problem. First, a forecast is only as good as its model. Economic projections may include assumptions that prove to be unfounded. But even a good forecast is limited to predicting a range of probabilities. If an analyst tells you they think there is an 80% chance that the market will go up this quarter, all they are really saying is that it might go up and it might go down. You probably did not need an analyst with a fancy model to tell you that.
We put little faith in short term market predictions. Even if they are accurate, you can probably not afford to bet the farm on them. We prefer to take a longer-term view. We cannot be sure how an investment will perform over the next month or next year, and do not believe in speculating on short term results. We feel much more comfortable in the trend over the long run.
Clients, if you have any thoughts or questions, please call or email us.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
All investing involves risk including loss of principal. No strategy assures success or protects against loss.
It is that time of year. Prognosticators and pundits issue their forecasts for the year ahead. Wouldn’t it be nice to know what the future holds! Some forecasts are hedged, and don’t really say much. Our prediction is quite specific.
Many of those who have visited our offices know that we actually do have a crystal ball. It forecasts the direction of the stock market for the coming year. It does not say how far the market will go, but it always predicts the direction.
If you knew which way the stock market was going to go, could you make money investing?
Here’s the catch: our crystal ball has only been 74% accurate1. So perhaps the question should be, if you knew which way the stock market was going to go 74% of the time1, could you make money investing?
Without further ado, here is what my crystal ball says about the direction of the stock market for the year beginning January 1: it will go up.
Long-time observers will not be surprised. The crystal ball always says the market is going up. It has never predicted a down year. And checking back over the past hundred years, according to Standard & Poor’s, it has been right 74%1 of the time.
We don’t know how well its track record will hold up, but we believe this presents a favorable backdrop to buy bargains, avoid stampedes in the markets, and seek to own the orchard for the fruit crop. In other words, to keep on keeping on, following our plans and strategies.
It is tempting to include a discussion of the economy, the strengths we perceive, and the faint possibility of recession. We’ll leave that to people with more time on their hands. If your plans or planning will be evolving in the new year and require our attention, please call.
1. Online Data, Dr. Robert J. Shiller: http://www.econ.yale.edu/~shiller/data.htm. Accessed December 31st, 2018.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
Investing involves risk including loss of principal. No strategy assures success or protects against loss.
Many of you may remember the classic Warner Brothers roadrunner cartoons. Wile E. Coyote continually schemes to catch the roadrunner only for his plans to backfire. Often he winds up sailing haplessly over the edge of a cliff, hovering in midair. Only once his predicament finally dawns on him does he plummet to the canyon floor below.
Sometimes he falls almost immediately. Other times he may remain hanging in the air, oblivious, for an extended time before gravity kicks in. You know as soon as he goes off the cliff that he is in for a fall. You can probably even figure out what will happen as soon as he puts his plan together. But sometimes his physics-defying act winds up dragging things out.
The market, much like the cartoon coyote, does not obey the laws of physics. Sometimes it seems obvious that something may be due for a big market move. A company may seem like it is absolutely set to take off, or due for a fall. But no matter how obvious it seems that a price is unsustainably high (or low), the market can stubbornly defy gravity for a long time before reality finally sets in.
Sometimes a prediction may pan out quickly. Sometimes they may pan out later, or not at all. We have enough experience to come to terms with this and take the long view. We do not believe in trying to time the market: we cannot claim to know what will happen in the market, and we certainly cannot claim to know exactly when.
We think we may be able to make a pretty good guess about what will happen—eventually. But we would rather stick to our core investment principles than try to predict the immediate actions of a market that sometimes seems to have more in common with slapstick cartoons than the real world.
Clients, if you have any questions or concerns, please email or give us a call.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
All investing involves risk including loss of principal. No strategy assures success or protects against loss.
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