While the weather man/woman continually predicts the weather, he/she is more often wrong versus right.
Predicting the weather is subject to millions if not billions of variables. No wonder they are usually wrong, but they can often get somewhere in the ballpark.
Predictions of all kinds are subject to massive errors. Why is this? The number of variables is one reason and the other is dynamics.
Take investing, a very small few may be able to predict the next step once in a while, but with each step, the dynamics of people’s reactions to that prior step are incalculable. Few, if any, are able to predict the second step. As time moves forward, predicting the next steps (third, fourth, etc.) is literally impossible. There are just too many variables and measuring how people will react to each successive step becomes massive as interactions grow at an exponential rate.
I have found the best way to deal with the future is to delve into the past. For investments, it is how a company’s management has proven to be successful in constantly adjusting to changing circumstance in the past. In other words, “How do they bob and weave?” as a boxer would put it.
So if your broker is supremely confident in their view of the future, I have one word – run. They can say something is likely to happen, based upon the past, but supreme confidence in predicting the future is dangerous. This is why I am a value investor and look to the past for answers. Those answers are not guaranteed to come true, but it is way better than venturing out into future with supreme confidence and trillions of outcomes, steps and dynamic changes.
The past is often a great proxy of the future, but as with anything in life, there are no guarantees!
Be smart, be well-read, be aware and be successful.
