July 5, 2017
What does this mean to you: Wholeness quiets infinite phenomena?
It’s actually a series of buzzwords randomly organized into a statement, signifying nothing. Yet a peer-reviewed study found many participants had a “propensity to judge bullshit statements as profound.”
Whatever the reason for this odd behavior, it can be dangerous to your financial health. The financial media is filled with “pseudo-profound” nonsense. Your ability to reach your financial goals may depend on identifying and ignoring it. Here’s a great example.
According to this insightful blog, mega-firm JP Morgan publishes an annual “Long-Term Capital Market Assumptions Report.” This report is for institutional, wholesale, professional clients and for qualified investors only. It must be very sophisticated, right?
The 2016 edition notes that it contains “time-tested projections to build resilient portfolios.” This paper contains reference to impressive sounding phrases like “private equity illiquidity premium” and “modeling and managing fat-tailed risks.” Surely the authors have some insight into the future.
An analysis of six of these reports going back to 2011, found that, of the 7 total predictions listed for the asset classes selected for analysis, every one was inaccurate.
The study qualified its results by noting these predictions were intended for 10-15 year periods, so they still may turn out to be accurate. Nevertheless, “the big takeaway” is “relying on professional judgment in terms of predicting future returns is not a reliable strategy.”
You might want to heed the conclusion of this study: “Based on this preliminary study of JP Morgan's capital market assumptions, we think it is time for them to stop publishing this annual forecast and stop alluring (sic) investors into some false security that a large brokerage firm has some super power that allows them to see the future.”
Predictions are often justified with sophisticated language justifying the position asserted. No one has the expertise to predict the direction of the stock market reliably and consistently.
Don’t base your retirement future on “pseudo-profound” nonsense.
I recommend this blog (referenced in the text above) by Tom Allen and Mark Hebner. Well worth reading!
https://youtu.be/gShGs3bJUTE?rel=0
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