Most Trusted Senior Resource Network FOR South Carolina Seniors, Created BY South Carolina Seniors | ||||||
Most Trusted Senior Resource Network FOR South Carolina Seniors, Created BY South Carolina Seniors | ||||||
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When you come to think of it, there aren't too many professions that get paid good money for being wrong practically all the time. Now, one such job might be obvious, like the weather forecasters we see on TV, or hear on the radio. They are wrong with their predictions quite a bit. In some cases they are fairly accurate, but many times they are not so accurate. But when you look at the tough job they have, you can accept some deviation from their forecasts to the actual weather. I mean, they've got the job of predicting mother nature, with all her might and fury! And when all is said and done, with their sophisticated radar and satellite equipment, they come fairly close quite a bit of the time. And, for most of us, close enough, is close enough. We can usually know what to wear, and to be prepared for a big storm, etc. They're not perfect, but they are certainly good enough. Now, there's another group of professionals who are much higher paid on average than weather people. Much higher paid. And this particular group of professionals have the same forecasting type of job that weather people have. Instead of predicting the weather, they are supposed to be predicting the future of the economy. Yes, this group of highly paid folks are called "economists". And, this collection of "experts" have the job of telling us what interest rates are going to do. What the dollar is going to be priced against foreign currencies. What inflation rates will be. Where the prices of stocks and bonds will go to. And so on. And, from all my years of watching these folks, and watching others watching them, I find it remarkable that they are wrong just about all of the time! Yes, you heard me right. They are just plain incorrect about basically everything! Now, keep in mind that these forecasters of economic tides are mostly very highly educated individuals. You know, MBA's from Harvard, PhD's from Stanford, etc. You know the type. And, these folks work for big financial institutions, banks, private foundations and think tanks, and of course, our buddies in the government. Their opinions influence so many decisions that companies and individuals make, that they literally have as much power as mother nature herself. Yet, sadly, they just don't have a clue. Let me give you a couple perfect examples of what I mean. First off, exactly a year ago, 60 top economists were surveyed by Business Week Magazine. Here’s one of the predictions they virtually all agreed upon: The Price of Oil Would Be $39 Per Barrel Or Less… Their Best Estimate Put Oil At $25 Per Barrel! Hmmm. Anyone notice anything WRONG with this prediction? Anyone notice that as of this writing… OIL IS AT $61 PER BARREL! These economists were only off by anywhere from 56% to 144% in their “wise” forecast! Not too shabby, huh? Another example: The same group of economists called for inflation at the Producer Level, (Producer Price Index - PPI) to vary between 1.9% and 4% for the YEAR 2005. Well, to say they’re wrong is an understatement because the US Department of Labor reported that the PPI was up 1.9% JUST FOR SEPTEMBER 2005 ALONE! And, so far, in 2005…the PPI is up 6.9%! If you compare this to the forecast by the “highly knowledgeable, highly educated group of over 60 economists…they were off on their inflation predictions by as little as 73% and as much as 263%! Wow. Now it wouldn’t be too much to expect these deep six or seven figure income guys to be able to forecast the economy within a narrow range of accuracy, like maybe 5-10% off? (Instead of the 56% - 263% off?) Imagine what would happen to 99% of us if we were off by 263% in what we do for a living? Imagine how well a doctor would do, for example, if he or she was off 56% to 263% of the time on their diagnosis of illness? Or how about an airplane pilot who was off by ½ mile or more from the runway? See, there’s no other profession as highly paid…who are basically so incompetent at their jobs as economists. They mostly guess, just like you and I could guess…except that so many people and companies and government agencies actually listen to them! And, as we know, by following their predictions and forecasts…we get messed up royally by the people who make all those decisions that directly affect our financial life You know, these folks at the Federal Reserve who determine the money supply and interest rates…listen to economists! Those folks in Congress who pass the tax laws we get stuck with…listen to economists! Those folks who manage your company pension or 401(K) plan…listen to economists. It's their job of telling us what interest rates are going to do. What the dollar is going to be priced against foreign currencies. What inflation rates will be. Where the prices of stocks and bonds will go to. And so on.
| And, from all my years of watching these folks, and watching others watching them, I find it remarkable that they are wrong just about all of the time! Yes, you heard me right. They are just plain incorrect about basically everything! Now, keep in mind that these forecasters of economic tides are mostly very highly educated individuals. You know, MBA's from Harvard, PhD's from Stanford, etc. You know the type. And, these folks work for big financial institutions, banks, private foundations and think tanks, and of course, our buddies in the government. Their opinions influence so many decisions that companies and individuals make, that they literally have as much power as mother nature herself. Yet, sadly, they just don't have a clue. Let me give you a couple perfect examples of what I mean. First off, exactly a year ago, 60 top economists were surveyed by Business Week Magazine. Here’s one of the predictions they virtually all agreed upon: The Price of Oil Would Be $39 Per Barrel Or Less… Their Best Estimate Put Oil At $25 Per Barrel! Hmmm. Anyone notice anything WRONG with this prediction? Anyone notice that as of this writing… OIL IS AT $61 PER BARREL! These economists were only off by anywhere from 56% to 144% in their “wise” forecast! Not too shabby, huh? Another example: The same group of economists called for inflation at the Producer Level, (Producer Price Index - PPI) to vary between 1.9% and 4% for the YEAR 2005. Well, to say they’re wrong is an understatement because the US Department of Labor reported that the PPI was up 1.9% JUST FOR SEPTEMBER 2005 ALONE! And, so far, in 2005…the PPI is up 6.9%! If you compare this to the forecast by the “highly knowledgeable, highly educated group of over 60 economists…they were off on their inflation predictions by as little as 73% and as much as 263%! Wow. Now it wouldn’t be too much to expect these deep six or seven figure income guys to be able to forecast the economy within a narrow range of accuracy, like maybe 5-10% off? (Instead of the 56% - 263% off?) Imagine what would happen to 99% of us if we were off by 263% in what we do for a living? Imagine how well a doctor would do, for example, if he or she was off 56% to 263% of the time on their diagnosis of illness? Or how about an airplane pilot who was off by ½ mile or more from the runway? See, there’s no other profession as highly paid…who are basically so incompetent at their jobs as economists. They mostly guess, just like you and I could guess…except that so many people and companies and government agencies actually listen to them! And, as we know, by following their predictions and forecasts…we get messed up royally by the people who make all those decisions that directly affect our financial life! You know, these folks at the Federal Reserve who determine the money supply and interest rates…listen to economists! Those folks in Congress who pass the tax laws we get stuck with…listen to economists! Those folks who manage your company pension or 401(K) plan…listen to economists. Well, there’s not really much we can do about the fact that for whatever reason, many people who control the economy we live in. And since we have so little control over what these genius economists and the people who listen to them say and do…WE HAVE TO DO OUR OWN PLANNING AND TAKE CARE OF OURSELVES! Now, we candidly admit that we don't have a crystal ball that can see into the future. But, unlike our overpaid friends in the economic community, we know the two secrets to financial stability, that can work year in, year out...regardless of the ups and downs of economic fortunes: Planning And Diversification! Yes, the one two punch of financial freedom. Planning and diversifying. Since none of us can pay any attention to these so called economic forecasts, we must carefully plan our finances based on the real economy, not the fake one the economists would like us to believe! And we must diversify our assets to provide the ultimate protection of our futures! In all the years we've been helping clients, we know that the two most critical factors for the success we enjoy are planning, and not putting too many eggs in one basket! And the key to being successful at planning, is to start doing it NOW, and to constantly monitor the plan to keep it on track. (Which means constantly diversifying your assets as you monitor your plan!) If you haven't started your financial planning for '06, DO IT NOW! Don't delay. Call us up for your annual review, RIGHT NOW, while this is fresh on your mind. We'll take care of the rest! REMEMBER- WE WANT YOU TO CONTACT US WITH YOUR "HERE'S WHAT WE'RE THINKING ABOUT DOING QUESTIONS", NOT YOUR "GUESS WHAT WE JUST DID!" COMMENTS! - J.F. Capital Management, South Carolina | ||
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