It's Forecasting Season
New Year's resolutions aren't the only January lists that look embarrassing 12 months later. In the financial industry, January is the traditional season to make BOLD PREDICTIONS! The bolder the prediction, the louder the headline, the more eyeballs will find it.
This time last year, economists predicted that 2014 was going to be the year of rising interest rates, inflation, and soaring energy prices. Yikes. Last year's wayward predictions are a reminder to not put too much stock, so to speak, in forecasts.
We're reminded of a few great quotes collected by Howard Marks in the chapter on forecasts in his book The Most Important Thing:
“We have two classes of forecasters: Those who don’t know-and those who don’t know they don’t know.” – John Kenneth Galbraith
“It’s frightening to think that you might not know something, but more frightening to think that, by and large, the world is run by people who have faith that they know exactly what’s going on.” –Amos Tversky
“There are two kinds of people who lose money: those who know nothing and those who know everything.” –Henry Kaufman