“We really can’t forecast all that well and yet we pretend that we can, but we really can’t.” – Alan Greenspan to Jon Stewart in a 2013 interview
Scientist Neils Bohr said that “prediction is very difficult, especially if it is about the future.” Yet it seems that financial experts and publications just can’t stop trying to make predictions anyway.
One article on MarketWatch.com warns that the S&P 500 will fall below 700 while another gives reasons why we’ll see a see a big rally just as soon as this little “correction” is over.
Yesterday, the mood in the market was optimistic and the S&P 500 seemed poised to reach new highs. Today, after the Brexit vote, the financial media is full of panicked predictions of how the economy will be impacted for years to come.
Financial experts get it wrong all the time. We just don’t know who will get it right until we can see the hindsight view.
Five Famous Investors and Financial Experts (who didn’t have crystal balls)
Pershing Square Holding’s Bill Ackman has made some very savvy investments in the past. He was one of a handful of hedge fund managers who correctly predicted the crisis, shorting mortgage-backed CDOs. His fund was also flying high with multiple double-digit returns in 2014.
Then a couple of disastrous bets – large positions for Valeant Pharmaceuticals (the “pharmaceutical Enron”) and against Herbalife, which Ackman maintains is a pyramid scheme, cut Pershing Square down to size with losses exceeding 50% between August 2015 and March 2016. A pro-Herbalife website erected in self-defense features an article dedicated to the worst of Ackman’s investment debacles, “When Ackman’s Wrong, He’s Really Wrong.”
“There are two times in a man’s life when he should not speculate: when he can’t afford it, and when he can.”
— Mark Twain
In 2008, the housing market and housing bonds collapsed, and almost every “safe haven” for money was shaken to the core. Investment banks failed and blue chip stocks tanked. The New York Times compared companies once considered safe investments and “cornerstones of the economy” to “penny stocks.”
Some investors began snapping up gold, which seemed headed for the hills. Those who purchased gold in late 2011 or 2012 on the continued urging of doomsday prophets suffered losses of up to 40% and are still waiting for gold prices to rebound.
Record low-interest rates have left savings accounts, CDs, money market funds, and other cash equivalents lagging far behind inflation. This has kept investors desperate for returns in the stock market, nervously watching the increasing volatility and wondering if every little “correction” is only the start of the next big crash.
What’s an investor to do? How do you invest for a possible correction, crash, or bear market?
After years of low-interest rates, is the life insurance industry healthy enough to withstand another economic downturn?
Find out in this week’s in-depth article, authored by our friend L. Carlos Lara, reprinted with permission from the Lara-Murphy Report with permission.
L. Carlos Lara is CEO of United Services and Trust Corporation, a consulting firm specializing in business advisory services with a primary focus on working with companies in financial crisis. Lara is also the co-author of How Privatized Banking Really Works with economist Robert P. Murphy.
“Let them sell their summer homes and jets, and return those fees to their investors.”
– Letitia James, Public Advocate for the New York City Employees’ Retirement System, which voted in April 2016 to liquidate its hedge funds investments, as quoted in FT.com
Decapitalization, the worst returns since the great recession, a bizarre fraud conviction, bets losing billions, and systemic issues – hedge funds have been making the news for all the wrong reasons.
Columnists are now debating whether or not hedge funds, as an asset class, are dead, dying or merely not feeling well. According to The Economist, recent fund closures and expectations that more will follow, “suggest the industry’s era of stratospheric growth may be in the past.”
“Saving for a kid’s college can feel like trying to scale a skyscraper. Unfortunately, the tool most recommended to parents for the challenge is often little better than a step stool — one known to wobble.”
– Ben Steverman, Bloomberg.com
Today’s article is a guest post from a friend and colleague, Bryan McCloskey from the Philadelphia. PA area. Bryan is also a Prosperity Economics Advisor and a real estate investor as well. We loved his thinking about college savings plans and asked if we could share his “5 questions” on our blog, too, You can find more of Bryan’s articles at BryanMcCloskey.com
You want the best for your children. You want your children to go to college. You don’t want them saddled with debt when they get out. You’re prepared to save money to help with education costs.
So, is “saving” in a conventional 529 Plan the right thing to do?
I’m going to let you be the judge of that.
What I’d like to do here is just open your eyes to a few things that “typical” financial advice tends to overlook.
“If you think money can’t buy happiness, you’re not spending it right.” – Michael Norton, Harvard Business School professor behavioral economics researcher
In a previous article, “The Truth About Money and Happiness,” we reviewed the research on the relationship between income, wealth, and happiness. While there is no guarantee that earning money, having money, or even a large windfall will make you happier, research has shown that how we USE the money we have can make a big difference in our happiness! Follow these guidelines to spend your way to contentment:
Purchase more experiences, less “stuff.”
Research from Dr. Thomas Gilovich of Cornell University reveals that spenders experience more long-term happiness and satisfaction when they buy experiences rather than possessions. A new watch or necklace increases happiness for a short while, but soon it becomes a routine part of the buyer’s environment, contributing little to happiness and perhaps even inducing buyer’s remorse.
Perhaps it’s counter-intuitive. According to the “The Journal of Positive Psychology”, most people, tend to predict that material purchases will make us happier than spending the same money on experiences, but in fact, the opposite is usually true. As Professor Gilovich explains in a Wall Street Journal article:
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