The Investment Scientist

Can experts predict the future?

Posted on: October 28, 2009

Crystal Ball“When the blind lead the blind, both shall fall into a ditch.” – Old Proverb.

In July 2007, I went to an event where the keynote speaker was a former Federal Reserve Board governor who had worked with Alan Greenspan for many years.

I had had a hunch since early 2006 that the housing bubble would end badly. However, the market had proven me wrong month after month. Bewildered, I felt an expert of that caliber could help prove or disprove my hunch once and for all.

The speaker spoke of “concentrated drag, resilience elsewhere.” The drag he mentioned was the cooling real estate market. He predicted that the drag would be “diminishing.” In any event, he said, the drag would help loosen economic constraints that were causing inflation. This would move the economy closer to “macroeconomic nirvana.”

During the Q&A, someone from the audience asked if he was concerned about a recession. He answered that a recession could “theoretically” happen, but he saw no reason why there would be a recession in the next two years. (See my meeting note here.)

We all know what happened a few months later.

We listen to experts because we fear that we are blind to what will happen with the economy and the markets. But what if the experts are also blind?

Sign up for The Investment Fiduciary monthly newsletter and get 10% off investment planning services.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

Author

Michael Zhuang is principal of MZ Capital, a fee-only independent advisory firm based in Washington, DC. He is also a regular contributor to Morningstar Advisor and Physicians Practice. To explore a long-term wealth advisory relationship, schedule a discovery meeting (phone call) with him.



You may also get his monthly newsletter, or join his Facebook page for regular wealth management insights. Michael's email is info[at]mzcap.com.

Twitter: @mzhuang

Error: Twitter did not respond. Please wait a few minutes and refresh this page.

%d bloggers like this: