I got bounced this piece by someone else this morning and asked for comment. I was too lazy to actually write anything long winded about how it is nonsense to try and predict the market, how no one knows where the market is going, or how it is foolish to base your investment decisions on waiting for a crash . But then I remembered this excellent post by Pension Partners someone else had sent me and I fired that off to them.
There are two points in the original article that need commenting on. The first is that no one does know where the market is going. It is not simply that a small cadre do know and are keeping it a secret from you for whatever purpose. No one knows but very few are inclined to tell you that – particularly when they have a vastly well paid job at stake. And anyone who does claim to know is simply caught within their own narrative fallacy and these fallacies are often self correcting. It is safest to think of people who offer predictions about the market as being in the small psychological space as people who make predictions about the end of the world. You will note by the simple fact that you are reading this that none of the predictions regarding the end of the world have to date come true. Undeterred those who make the predictions simply change their story – narratives are always corrected to protect our ego.
However, there is something more troubling for traders with regard to predictions. The moment I make a prediction I have staked my reputation and my ego on that prediction. I am emotionally wedded to this prediction – this coupling means that I am loathe to make adjustments to it or walk away from it. For example if I make a public prediction that silver will double and take a position in accordance with that prediction I am very reluctant to take any form of defensive action if the silver decides it doesn’t want to cooperate with my prediction.
There is a certain freedom in having an approach that makes no predictions because it frees me from the emotional angst of being emotionally tied to a position. This in turn makes it much easier to take any form of defensive action of switch views completely