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A Crystal Ball Cracked; Market Predictions in the New Year

We’ve entered that exciting time of year when all sorts of market predictions are made by people who are mostly claiming that they knew the future and have accurately predicted it over a great track record. If you’re smart, you’ll turn off the TV, move on to the next article, or better yet, go for a walk (and get a head start on those New Year’s resolutions).

The truth is that none of us can accurately predict the movements of the markets. If we could, then we would always make trades ahead of market moves, and it wouldn’t take long before that amazing prognosticator with the working crystal ball would have amassed billions from her stock market trades. Have you read about anybody doing that lately? Most of these people are employed at think tanks or sell their predictions to credulous investors. We should question why they would need that salary check or your hard-earned subscription dollars if they had the ability to make billions just by checking the ‘ol crystal ball a couple of times a day.

A recent article by frequent blogger Barry Ritholtz offers some rather amazing data on people in the prediction business. You may know that the cryptocurrency known as “bitcoin” is now worth about $3,500—way, WAY down from the start of the year (January 2, 2018 price was $14,781). So how well did the people in the prediction business foresee that downturn?

Not well. In his article, Ritholtz noted that Pantera Capital predicted that Bitcoin would be selling for $20,000 by the end of this year. Tom Lee of Fundstrat was more bullish, forecasting that bitcoin would breach $25,000 by now. Prognostications by Anthony Pompliano, of Morgan Creek Digital Partners, were still more bullish, predicting bitcoins worth $50,000 by the end of this year. John Pfeffer, who describes himself online as “an entrepreneur and investor,” anticipated $75,000 bitcoins by now, and Kay Van-Petersen, Global Macro-Strategist at Saxo Bank, one-upped everybody with his prediction that bitcoins would be worth $100,000 by December 31 of this year.

Ritholtz offers other examples, like radio personality Peter Schiff telling listeners since 2010 that the price of gold has been riding toward $5,000 an ounce. (It’s riding around $1,200 currently.). Jim Rickards, former general counsel at Long-Term Capital Management, is more ambitious, telling his followers that he has a $10,000 price target for an ounce of gold.

If you happen to follow former Reagan White House Budget Director David Stockman, you have been told that stocks are going to crash in 2012, 2013, 2014, 2015, 2016, 2017, 2018 and 2019. Someday he’s going to be right, and will no doubt be touting his amazing prediction abilities. As my grandpa would say, “Even a blind squirrel sometimes finds a nut.”

When you read about a prediction, instead of worrying about what you should change in your life or reaching for the phone to call your financial advisor (although, we’re always happy to chat with you!), try writing the prediction down on a calendar or reminder program like the app, and come back to it a year later. Chances are you’ll be less impressed then than you might be now.

In the meantime, we are happy to discuss any predictions you’re hearing and how they relate (or don’t) to your personal goals. We also hope that 2019 is a joyous, prosperous year for you filled with more of the wise decisions and hard work that brought you success in 2018!

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