What The &%#?Forecast!!!

John Osbon - January 7, 2015

Did your investment advisor predict the 50% drop in oil prices in 2014, the surging US economy, the strong dollar and the worldwide decline in interest rates? No? No one else did either. Which begs the question: how is your advisor – and his/her forecasting – working for you? Are you paying a fee for your advisor to guess what will happen next?

The courage to be wrong
All credit to Byron Wien, Blackstone Group vice chairman for bravely publishing his “10 Surprises” list year after year.  As a self-made investor and Wall Street guru you would be hard pressed to find anyone more experienced and articulate on the investment scene. But even with all his access to data and newsmakers, his predictions are more often wrong than right. (See his 2014 report card) If Byron can’t forecast accurately, who can?

Wrong againfuture-crystal-ball
Meredith Whitney became very famous in the investment realm when she was the first to predict Citibank would cut its dividend in 2007, an outrageous suggestion at the time. It turns out she was right, and the media was quick to anoint her the brightest forecaster in the room. But her next big prediction – the collapse of the municipal bond market – was a complete bust. And her one-year-old hedge fund shut down in 2014 after losing 11 percent in an up market. An expensive oops.

The forecast for you: 4 questions
You can’t blame investment pros for trying to predict the future and profit from it. But very few succeed, and even fewer succeed consistently. For you to predict which money manager will make the best prediction (or guess) in a given year is just as sketchy.

We suggest you stay out of the prediction business altogether (like we do) and focus on finding an advisor who can answer these four questions:

  • Why is this investment strategy best for me?
  • How is your firm built for my investment success?
  • How are my goals, dreams, and needs matched with my portfolio?
  • What risks might I be taking with my money and my future that are not obvious?

We plan, we don’t predict
We can’t tell you what will happen with the dollar, oil prices or technology stocks next year. Our portfolio design principles don’t rely on guessing right. Instead, they are centered on you, and reaching your financial and investment goals. If that sounds more like what you expect, let’s get together and talk about how you can reach your goals without predicting an unknowable future.

John Osbon – josbon@osboncapital.com

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