Not Even the So-Called Geniuses Can Predict What the Stock Market Will Do!

Not even the so-called geniuses can predict what the stock market will do!

Well, let’s begin with some humor. In case you may have missed it, we just elected a new president.

Just a little after midnight on Election night, Dr. Paul Krugman in his capacity as a columnist for The New York Times wrote a column headlined, PaulKrugman: The Economic Fallout in reaction to the results of the of the Presidential election. Here are the first three paragraphs of that column:

It really does now look like President Donald J. Trump, and markets are plunging. When might we expect them to recover?

Frankly, I find it hard to care much, even though this is my specialty. The disaster for America and the world has so many aspects that the economic ramifications are way down my list of things to fear.

Still, I guess people want an answer: If the question is when markets will recover, a first-pass answer is never.

Okay. Now hear me out. If you’ve followed my work for any amount of time, you may have heard me say what I am about to repeat perhaps a few dozen times already, so pardon the repetition, but it seems like I am going to have to keep making this point. 

When it comes to precisely what the investment markets are going to do, no one anywhere on this planet knows. It doesn't matter their level of education, net worth, eloquence, or which TV network, magazine or newspaper they write for – they can’t predict the future. Period. End of story.

Please don't fall for any of this prognostication nonsense, as it is indeed one of the fastest ways to destroy your hard-earned wealth.

Now back to Dr. Krugman’s column. According to him, the markets will “never” recover. Wow – how scary. Did you know that the very markets about which he made that comment recovered within a matter of hours? By the very next morning when the sun came up, they had rebounded. Not only that, but on top of it all, they’ve hit an all-time high since then.

Talk about ridiculous assertions without any real basis in fact that couldn’t be further from reality. Imagine those unsuspecting folks who woke up the day after the elections to this column by a man who, in many respects, is an accomplished academic – an economics professor who has taught at prestigious institutions and a Nobel Prize recipient – and based on his column took action with their investments. They would have made a terrible mistake, wouldn’t they? Exactly. That is what I am cautioning you against. 

There are many people like Dr. Krugman out there. They have very impressive backgrounds, have won many accolades, and have really loud megaphones. But you should never, ever lose sight of the indisputable fact that none of these folks has ever won an award for accurately (and consistently) predicting investment markets. All they do is state their opinions.

Do not confuse opinions for facts, and certainly never make investment decisions based on them.

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