Hindsight is 20/20

Investors continually make predictions about the future, trying to “beat” the market and, in many instances, failing to do so. While there are instances when these predictions turn out in their favor, many of these predictions turn out to be pretty comical in retrospect. We’ve summarized a few of our favorites since the turn of the century as a reminder of how wrong  we can be when we try to outsmart the wisdom of crowds:

• Dow > 30,000
  • Robert Zuccaro predicted the popular index would eclipse that mark in 2008 in his book Why It’s Different This Time (published in 2001, a dive into the Amazon reviews is guaranteed to inspire a laugh) and couldn’t possibly have imagined how poor his timing would be…
  • Zuccaro’s book was published after Glassman and Hassett’s book, Dow 36,000, and we’re still 10,000 points short of that mark.

• FAANG Stocks (Facebook, Amazon, Apple, Netflix, Google)
  • The misses regarding Facebook’s IPO were wide-ranging back in 2012.
  • Microsoft CEO Steve Ballmer whiffed on predictions regarding both of the As in FAANG: he laughed at the prospect of Apple’s iPhone gaining significant market share in 2007, then was quoted saying that Amazon wasn’t a “real business” and was a bad investment in 2014.
  • Paul La Monica of CNN Money thought Netflix was highly overvalued back in 2003…in hindsight, things have turned out alright for the streaming service.
  • Whitney Tilson of TheMotleyFool predicted Google’s stock would disappoint investors “foolish enough to participate in its overhyped offering” in 2004.

• Market Crashes
  • 2013: (our composite portfolio return was 17.0%)
    • Forbes published Peter Schiff’s prediction that markets would get crushed in 2013.
  • 2016: (our composite portfolio return was 9.2%)
    • Paul B. Farrell of MarketWatch predicted a crash in 2016.
    • CNBC published comments from Ron Paul warning of an impending “day of reckoning” in the stock market (not for the first time).
    • MarketWatch published an interview with author of Rich Dad Poor Dad who asserted that a collapse is coming in 2016 (as he foresaw in 2002).

At Yeske Buie, we know that it is impossible to accurately predict what will happen in the future on a consistent basis. As such, we position our Clients’ portfolios in a globally diversified mix of investments that we review constantly, and we apply a diligent and disciplined rebalancing approach to capture growth wherever and whenever it emerges. As we’ve acknowledged in the past, markets climb a wall of worry. And while predictions about economic growth or contractions will eventually always be right, the tricky part is accurately anticipating the timing and the magnitude of those movements – which we don’t even attempt to do, as trying would be a fool’s errand. Barry Ritholtz of Bloomberg agrees, noting:

“My favorite cranks are way outside that broad range. There are too many to note, but perhaps the most notable offender is former Reagan White House Budget Director David Stockman. He has been more than perennially bearish — he predicted a market crash in 2012, 2013, 2014, 2015, 2016, 2017, 2018 and 2019. Good rule of thumb: if you make the same call very year, even if it eventually comes true, you get no credit for it.”

Coincidentally, we correctly predicted that Stockman would be wrong back in 2013…