The answer is rarely blowing in the wind.
Pity poor Michael Fish. Those of a certain age will remember that he was once one of Britain’s most respected weather forecasters, his specs and moustache forming an essential part of the kit for the TV impressionists of the day. However, unlike his contemporary John Kettley, who is best remembered for having a hit pop song named after him (John Kettley is a Weatherman reached number 21 in the UK singles chart in 1988), Fish’s name is regularly dropped for a less benign reason. Quite simply, he got a weather prediction spectacularly wrong.
The future’s not ours to see.
When he stated on air in October 1987 that there was no hurricane heading for Britain, he could hardly have made his forecast any clearer. That evening, south east England was hit by the worst storm for 300 years and 19 people were killed. Needless to say (and despite many years of sterling service) Fish’s reputation has been somewhat wind-damaged ever since.
Almost 30 years later, this incident is still being cited as an example of prediction gone wrong. Just after New Year, the Bank of England’s chief economist, Andy Haldane, compared Fish’s notorious error with economists’ failure to predict the crash of 2008-2009. He said that although economic models had fared well enough during the relatively settled period before the crash, they had failed to cope when the world was “tipped upside down”.
The problem with prediction.
This is the problem with prediction. No matter what the context, accurate prediction demands that the prevailing conditions tally with those that are expected. When those conditions change, they must change in the expected way. The greater the number of variable factors, the greater the chance that something unexpected will occur.
When you’re trying to decide whether you need to carry an umbrella as you head out to work in the morning, the weather forecast may well be a reasonably accurate information source. If the worst happens, you will simply get wet. But if you want to guarantee a rain-free weekend for a wedding in June 2019 – well, good luck.
Of course, the failure to predict the biggest economic collapse since the Great Depression was rather more calamitous than some rain-soaked nuptials. Everyone’s future prosperity is connected to the smooth-running of the global economy, and when things go wrong, we all feel the effects to a greater or lesser degree.
An expensive mistake.
Despite this, however, huge numbers of people put their faith in the predictions of those same economic forecasters – the ones who fell victim to Michael Fish syndrome a decade ago. In fact they don’t just put their faith in these predictions. They put their money in there too, buying and selling investments based on the ever-changing predictions of advisers and commentators – and even on the say so of friends and family who might have seen something in the financial pages and are now passing it on as gospel truth.
Choose a more reliable method.
At Callisto, we view these kinds of predictions as akin to the wind-blown detritus that swirls back and forth during a bout of breezy weather. Using such opinions as the basis of an investment strategy – or rather, a lack of strategy – is rarely more reliable in investment terms than taking a guess. That’s not to say that a prediction that a particular investment will fall or rise in value at a particular time can never be correct. It’s just that decades of evidence show that attempting to beat the markets is not a reliable way to invest.
Instead, our investment philosophy is based on tried and trusted methods. Markets are powerful processors of real-time information, so instead of trying to outsmart them, we put them to work on our clients’ behalf. We do not speculate or take short-term decisions; we ensure that clients’ portfolios are diversified, low cost and tailored to their specific financial situation. And perhaps most importantly, we stick to this philosophy whatever the fair-and-foul-weather commentators may say.
The aim, after all, is to help our clients achieve financial freedom. And that’s far too important to be left at the mercy of unpredictable economic winds.