Good guy. Bad guesses.

Written by John Osbon on February 26, 2014

Byron Wien is a brave man. Every year the Vice Chairman of Blackstone Advisory Partners announces 10 predictions, ranging from domestic policy developments and global power struggles to market and economic performance.  How’d he do in 2013?

In a word, awful.

By our count, seven of his predictions related directly to investible markets. One of the seven picks – big gains for the Nikkei index – was decidedly correct. The rest were way off.

Mr. Wien, a frequent and engaging guest commentator on CNBC, expected US and European stocks to fall more than 10 percent. They gained 30 and 24 percent respectively.

He saw Chinese stocks rising by 20 percent.  They fell 8.

He predicted gold to bump up about 12 percent. Instead it had its worst year in a couple generations, plummeting 28.

And so on.

Prediction

Actual

S&P trades below 1300 (down 150) No!  Up ~400 points to 1840
Financials down No!  Up ~24%
Shanghai up 20% No!  Down ~8%
Gold $1900 per ounce No!  Fell from 1690 to 1205
European equities decline 10% No!   Up ~24%
Nikkei 225 above 12,000 Yes!  Above 16,000
West Texas Crude falls to $70/bbl No!  Never below $87.  Up ~10%.

 

It’s harder than it looks
Don’t get the wrong idea. We’re not saying Mr. Wien should be able to make better predictions. We’re saying that if his predictions are so far off the mark this year (and have been for several years in row), then how can anyone be expected to know the future?

Check out his job description as described on the Blackstone web site: “senior adviser to both the Firm and its clients in analyzing economic, social and political trends to assess the direction of financial markets and thus help guide investment and strategic decisions.”

Prediction is his livelihood. This is a gentleman who has spent his entire career watching markets and the trends and events that influence them. His undergrad degree at Harvard was a stepping stone toward his MBA with honors, again at Harvard. At Blackstone he has as much access to market experts, cutting-edge data, and government and business leaders as anyone we can think of. He’s received numerous awards as an analyst, and has been called one of the most influential people on Wall Street. If anyone should be able to predict market moves, it’s Mr. Wien.

But if he can’t forecast a great year for stocks and a dreadful year for gold, with all his wisdom and tools, then who can? Not us. Not your old broker. Not your brother-in-law. Anyone can guess right on the direction of the markets, maybe a couple years in a row. But no one knows what the future holds.

That’s why we don’t try to predict. We assemble portfolios that span numerous asset classes, keep expenses low, and control tax liability. We accept risks that offer expected returns. But we completely avoid the risks of guessing wrong based on predictions, no matter who makes them.

Want to know more?
Give us a call at 617-217-2772 – we’d love to hear what’s on your mind

 


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