The Unpredictability of Predictions

The Unpredictability of Predictions

We all make predictions about things in life—some with lesser consequences than others. But if we see or hear something on TV or Radio (or now Podcast), then SURELY that information must be from an expert who knows something, and we should follow their advice.

Here are some things I have heard going into 2023:

• Because of Interest rate hikes, home prices will drop dramatically because the cost of mortgages will be so high.
• Interest rates will come down by the end of the year.
• Bitcoin will reach $100,000 in the next year, or another infamous (supposedly expert) advisor said that Bitcoin is a failed concept and will never succeed.
• The NY Jets are going to be in Super Bowl contention now that they have Aaron Rogers.
• As a result of the bank failures the stock market will tank by 15% in 2023
• Tesla stocks are going to tank because Elon Musk is an out-of-control idiot.
• ESG funds are going to soar because that’s where the next growth is for the future.
•  Global warming is “Boiling the oceans” and there was a 75% chance the entire north polar ice cap would be free of ice by 2016. (OK, this was back in 2009)
• The war in Ukraine will be over in 6 months.
• Barclays Capital Inc. said in 2022 that 2023 will go down as one of the worst for the world economy in four decades. Ned Davis Research Inc. put the odds of a severe global downturn at 65%. 

ALL of these ended up being false predictions. Not because the people who made them were bad, but because simply, some things are out of our control no matter how confident we might be in our guesses. They are just that – guesses, even if supposedly “educated guesses from trusted data.”

As of today, most portfolios that we manage have seen a lot of volatility this year (one of my predictions 😊), but despite that, most client portfolios that we manage are up between 10% – 15% based on the risk profile. Most people are pretty close to erasing the bad memories of financial year 2022.

When asking the all-knowing Chat GPT about predictions, I’m told that “predictions are based on current data and trends but are inherently uncertain due to the complex and dynamic nature of the world.”

So many people are Experts who are “often wrong, but never in doubt.” Me included, just ask my amazing wife.

My point is that it’s OK to make predictions, but we should be thoughtful before ACTING on those predictions with our financial planning where consequences could have devastating long-term effects.

Our personal predictions often do not consider variable things that we have no control over such as:

• Human behavior (Greed, Power, Weakness, War)
• Natural events (Fires or Volcanoes or Tsunamis)

 No matter how smart we think we are, or what fancy technology comes along to predict the future, certain things can be totally unforeseen disruptors:

• Pandemics
• Technological breakthroughs

There are things that we can see, that have a high probability of happening if we do stupid things. That’s why we teach our kids not to run with a knife or scissors in their hands, or randomly start a fire in the forest.

Recognizing the Unpredictability of Predictions, and then putting plans in place is one of the smart things we can do to mitigate the negative effects of things we just have no control over, such as:

• Life Insurance
• Having a Trust and a Will
• A diversified portfolio for long-term money
• Practicing delayed gratification.
• Don’t get into stupid debt that we will regret later, whether it be for college or lifestyle or anything else.
• Trying to time the market with our retirement money – the very essence of market timing creates the unpredictability of predictions.

Usually, when we get to the end of a year, we have the opportunity of hindsight and can look back and say, “Oh I am so glad I did that” or “Boy I wish I had done that differently.”

The good news about the end of the year is that looking back, not only can we see how smart we were if we made the right decisions, but also that we could correct some of our other decisions (or non-decisions) in the New Year to make next year an even better one.

I am so grateful for the trust placed in developing relationships with clients and the opportunity to add value to the decision-making process we all go through in planning our future. Let us not have delayed gratification for this but be grateful today for all the blessings that have come our way in 2023.

If you would like to discuss how you can make wise decisions for Retirement Planning and College Planning for your family, please don’t hesitate to contact Dave Coen to set up a no-cost consultation.

You can see more about my role as a Financial Advisor with SageView Advisory  HERE

Tel:714-813-1703
dcoen@sageviewadvisory / davec@collegeplanningamerica.com