Don’t Be Alarmed by the Financial Scaremongers
Jane M. Young, CFP, EA
About once a week a client asks me about the latest prognostication from some famous so called “financial expert/alarmist.” They are either predicting the demise of the world as we know it or predicting a triple digit increase in the stock market. Maybe I am exaggerating, just a little, but we’ve all experienced those who think they can forecast the future and lead us to “Financial Paradise.” I remind my clients of two things with regard to these “miraculous forecasters.” The first is that most of the TV hosts, radio shows, magazines, and financial authors are in the business of making money by selling magazines, books, and ad space. They are not in the business of providing the consumer with the best possible advice. They want to entertain, tantalize, and terrorize you. This is what gets and keeps our attention. Let’s face it! Good solid investment advice is really boring. It doesn’t change much and doesn’t sell magazines! Secondly, they cannot predict what the market is going to do tomorrow much less six months from now. Historically, no one has ever been able to consistently predict the future of the financial markets. Sure, when you have thousands of people making forecasts a few are bound to get lucky. As a good friend often says, even a blind man eventually hits the bull’s eye.
Develop a solid plan to meet your unique situation and stick with it. Don’t let the financial hype throw you off course. Below are a few quotes that help emphasize the fallacy of placing too much faith in financial forecasts.
“We’ve long felt that the only value of stock forecasts is to make fortune tellers look good. Short-term market forecasts are poison and should be kept locked up in a safe place, away from children and also from grown-ups who behave in the market like children” (Warren Buffett).
“Trying to predict the future is like trying to drive down a country road at night with no lights while looking out the back window” (Peter Drucker).
” We have two classes of forecasters: Those who don’t know – and those who don’t know they don’t know” (J.K. Galbraith, US Economist and diplomat).