Everybody wishes they had the power to predict the future – especially when it comes to the markets. If they could, they’d be rich.
Short of that mystical power, people turn to so-called “investment gurus” for guidance, believing that these self-proclaimed experts have the uncanny ability to predict movements in the market and even specific stocks.
I will let you in on a little secret…
INVESTMENT GURUS ARE FRAUDS! YOU WOULD BE BETTER OFF
THROWING DARTS AT A DARTBOARD.
The problem with investment gurus or with so-called psychics, soothsayers, and fortune-tellers, in general, is that every once in a while, one of them gets lucky. When this happens, the whole world goes flocking to them, thinking that every one of them has a crystal ball.
It’s the .1% of the correct predictions that get all the attention. Nobody talks about the other 99.9% of failed predictions. As the saying goes, even a broken clock is right two times a day.
Why do people all over the world shell out hard-earned money to mystics and fortune-tellers?
Because people want to know the future – thinking their lives will somehow be better if they can predict it. These charlatans don’t have to be right all the time. They just need to get something vaguely right once in a blue moon so that the word spreads and they can keep their gig going.
Have you ever heard of the blind Bulgarian psychic, Baba Vanga?
She supposedly predicted the 9/11 terrorist attacks. Even though the prediction she made was ambiguous, enough people read into her prediction that she received a lot of media attention.
The Baba Vangas of the world aren’t restricted to predicting world events. Wall Street is teeming with Baba Vangas – prognosticating investing gurus who claim to be able to predict the future of the markets and even of specific stocks.
There are thousands of investing gurus spewing gibberish online or making predictions on cable news about what will happen next with the stock market or even with specific stocks. The overwhelming majority of these guys are wrong, but the guy that gets something right is enshrined, and people flock to him for guidance.
How come the media spends so little time covering the gurus who get it wrong?
Take John Paulson, for instance. He was a fund manager who correctly predicted the housing crash and made a lot of money off of it. In the aftermath, investors flocked to his funds, hoping to cash in on his perceived ability to predict the market.
Things haven’t been going so well for Mr. Poulson since striking gold in 2007. This is what a Bloomberg article had to say about his fund in 2015:
“The manager, who shot to fame after making $15 billion on the housing crisis in 2007, has struggled to regain its footing since 2011 when bets on the U.S. recovery went awry, losing money in all of its main strategies – including a 51 percent tumble in the Advantage Plus fund. Paulson also lost money in investments tied to gold and Europe’s economy, causing assets to dwindle to $19 billion, half the peak in 2011.”
The reality is the Stock Market is a crapshoot. Nobody can predict it consistently.
There is data to back this up. CXO Advisory Group published findings on a study they conducted from 1998 to 2012 in which they collected data from 68 market forecasters.
They received more than 6,500 predictions made by these so-called investing gurus and experts. Some predictions involved whether an individual stock would go up or down, and some predicted the course the market, as a whole, would take.
The CXO Advisory Group study found that, on average, 46.9% of the predictions made by these investment gurus were correct. In other words, more than half of their predictions were wrong.
If you had monkeys toss a coin, you’d do better than these guys. The problem is these gurus wouldn’t be in business if people didn’t seek them out.
Most investors don’t understand that predicting the market is a fool’s errand.
I know people call Warren Buffett the Oracle of Omaha, but if you looked at his investment habits, he is the furthest thing from a psychic.
Warren Buffett doesn’t speculate:
- He has established investing principles, and he sticks with them because sticking to these principles has always worked for him.
- He doesn’t chase the sexy IPOs or the latest shiny stock.
- He understands that for every Amazon or Facebook, there are a hundred IPOs that fail. Just like failed psychic predictions, nobody hears about failed IPOs.
Warren Buffett looks for established cash flowing investment assets that have a record of profitability and will continue to be in the future. These assets aren’t sexy, but they build wealth and can eventually be sold at a profit.
Established dividend stocks and real estate fit Warren Buffett’s investing criteria.
Eschewing the speculation of Wall Street, institutions and ultra-wealthy investors have always allocated a large portion of their assets to commercial real estate. They don’t need a psychic or guru. The most significant predictor of the future with real estate is the past.
And what history has demonstrated is that commercial real estate has consistently provided investors with reliable periodic income along with long-term appreciation – all backed by a tangible asset and uncorrelated to Wall Street and the broader markets.
Here at Four Peaks, the only prognosticator we rely on is the past, where we have done very well in the mobile home segment of commercial real estate investing. Mobile home communities will continue to be a reliable cash cow well into the foreseeable future.
For building wealth, don’t rely on the so-called investing gurus who claim to be able to read market indicators.
The truth is most of them fare no better than a coin-flipping monkey. The only market indicators I rely on are the ones that have proven to be reliable year after year after year, like those in the commercial real estate class.
Trust the signs of long-term demand found in specific segments of commercial real estate like the ones found in affordable housing.
Trust the investing basics instead of grasping at mystical straws.