Byron R. Wien, Vice Chairman, Blackstone Advisory Services, has one of the best prediction records in the business. Over the last 25 years he has released his “10 Surprises” each January. Statistically, he has been right more than wrong. The bonus is that is he humble and open-minded, so he is definitely worth reading to test one’s own investment assumptions and biases.
In 2011 Byron predicts, among other things, a strong 5% growth US economy, gold at 1600, the S&P 500 at 1500, and the 10-year Treasury near 5 percent. Sound right to you? How would your portfolio do in that scenario?
Based on Byron’s track record, it may be tempting to stack one’s portfolio accordingly. But don’t be too hasty. In 2010, Byron predicted a flat S&P (it was up 15 percent), 10-year yields above 5.5 percent (actual was 3.3 percent), and a loss of less than 20 Democratic seats in Congress (60+). Betting on Byron last year could have been costly.
Predictions can be fun to make, thought-provoking to read, and enlightening to examine after the fact. But prediction is not portfolio management, it’s speculation. Om Malik in Bloomberg Business Week talks about the “perils of the prediction game” in technology (what happened to MySpace?), foreign policy (is the US falling behind Japan?), and media (what’s ahead for Kindle?).
But if not prediction, then what? Try diversification, with the mix of asset classes based on your goals and appetite for risk. Add indexing to cut costs and control taxes. Burton Malkiel, in his newest 10th Edition of A Random Walk Down Wall Street notes that investors are generally not diversified enough, especially internationally, due to “home country bias.” Diversification may sound boring, but properly done it can reduce risk and raise return, without relying on the prediction of unknowable future events.
Is your portfolio a gamble?
This communication may include forward-looking statements. All statements other than statements of historical fact are forward-looking statements (including words such as “believe,” “estimate,” “anticipate,” “may,” “will,” “should,” and “expect”). Although we believe that the expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectations will prove to be correct. Various factors could cause actual results or performance to differ materially from those discussed in such forward-looking statements.”
“Historical performance is not indicative of future results. The investment return will fluctuate with market conditions.
Past performance is not indicative of any specific investment or future results. Views regarding the economy, securities markets or other specialized areas, like all predictors of future events, cannot be guaranteed to be accurate and may result in economic loss to the investor.
Investment strategies, philosophies, allocations and holdings are subject to change without prior notice.
This communication is intended to provide general information only and should not be construed as an offer of specifically tailored individualized advice.
While the Adviser believes the outside data sources cited to be credible, it has not independently verified the correctness of any of their inputs or calculations and, therefore, does not warranty the accuracy of any third-party sources or information.
Adviser does not endorse the statements, services or performance of any third-party vendor.
Unless stated otherwise, any mention of specific securities or investments is for hypothetical and illustrative purposes only. Adviser’s clients may or may not hold the securities discussed in their portfolios. Adviser makes no representations that any of the securities discussed have been or will be profitable.
Any IPO alerts are purely informational and should not be construed as recommendations to invest.
Adviser is not licensed to provide and does not provide legal, tax or accounting advice to clients. Advice of qualified counsel or accountant should be sought to address any specific situation requiring assistance from such licensed individuals.
Any case studies or hypothetical client profiles are for demonstration purposes only. They illustrate the breadth and depth of the many clients we represent at various life stages. Any similarities to actual Adviser’s clients past or present are strictly coincidental. Individual advice and results will vary based on each client’s circumstances, objectives and prevailing economic conditions.