I’ve recently been reading “expert” predictions for the housing market in 2011.
It’s really entertaining. They are all trying to be positive and say that it is a good market. At the same time, they don’t want to look stupid so they are all saying “assuming interest rates stay low” and “if the trend continues”. So they are making sure that when (not if) their prediction is proven to be wrong, they can say, “oh, well I did say that it depended on….”, “X happened that wasn’t anticipated” and “Y wasn’t as high/low as predicted, that’s why I was wrong!”
It would be interesting to take all these experts and go back over their predictions for the last 20 years. In theory, they might be good because the theory assumes things don’t change. The tricky bit is predicting what will actually happen in real, very changeable, life.
That’s where the predictions come unstuck. Professor Fama, the Chicago economist explained in mocking terms how the word bubble made him annoyed and that the housing market was trustworthy. Alan Greenspan the head of the US federal reserve was convinced a bubble in housing was impossible. They are both experts with international reputations, not just C-list programme presenters in Britain. And of course, they were totally wrong when they were talking in 2007, just before the US property market tanked.
In a way, we can all predict the future – we can predict that things won’t stay the same forever and that the changes that occur will have unexpected consequences that make all other predictions look stupid. And we can probably predict that after the changes, all the “experts” will tell us how it was inevitable that this would have happened, to try to divert the rest of us from asking why, if it was inevitable, they didn’t predict it in advance!
So all the “experts” and celebrities and “media gurus” can say “if this continues as it is, and this trend continues, and nothing changes, then I can draw a line on a graph to predict the future”. And that straight line will be a great prediction, if nothing changes.
And we can all predict that things will change and their prediction based on a straight line graph is not going to be an accurate prediction of the future.
Those predictions, much as the media love them, are a waste of time, breath and energy. I wouldn’t bother to listen to any of them, just invest so that you aren’t gambling on picking the pundit who is lucky enough to have been right this time round.
Remember, when a journalist calls somebody a guru, pundit or genius, it is because their spell checker isn’t working and they can’t spell charlatan without it!