Why We Stink at Forecasting

In a very interesting post on our inability to forecast, Barry Ritholtz writes:

Even though predictions are almost useless, we persist in making and listening to them …

Click on the link below to read further:

10 Points About Forecasting and Why We Stink at It

While you are at it, you may also want to read the chapter “On Forecasting” in the book “Riding The Roller Coaster – Lessons from financial market cycles we repeatedly forget”

#RidingTheRollerCoaster

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A gift idea for this Diwali

A friend has ordered bulk quantity of my book “Riding The Roller Coaster – Lessons from financial market cycles we repeatedly forget” for his clients. This would be his Diwali gift for them.

What an idea!

During the festive days of Diwali, we pray two Goddesses – Saraswati and Lakshmi. While a book containing knowledge is an offering to Goddess Saraswati, a book on financial markets is an offering to Goddess Lakshmi.

I feel blessed.

Choose your gift wisely!

#RidingTheRollerCoaster

Why learn history …

The advantage of history isn’t so much to see how assets have performed but to see how people reacted to the performance.

The above are the opening lines from a very well written memo on the blog site http://www.novelinvestor.com.

 

Here is the full blog post: Howard Marks: Lessons from the Nifty Fifty

The history you do not know …

One of the ex-Presidents of the United States, Harry Truman is believed to have said, “The only thing new in the world is the history you do not know.”

I was reminded of this while talking to someone. When I asked a question, he responded stating that, such a thing has never happened. What he left unsaid was, ” … hence it is not going to happen”.

There are two important issues with such line of thinking.

  1. While talking about history, we often forget that what has not happened so far can still happen some time in future.
  2. The history one is talking about has limitations. It is either the recorded history or the one that one has read about or seen. This is what reminded of Harry Truman’s statement.

There is almost nothing new, except that part of history that we have not read. This is especially true in things involving human nature and human mind. Some things do not change. These include our basic instincts and emotions.

Read as much as possible about the history.

Investment is closely related to how one behaves rather than which is the best investment option or whether the timing is correct. If human emotions have not changed over the millennia, it makes life easy – just read.

This is exactly the purpose why I read many books on investment history and wrote “Riding The Roller Coaster – Lessons from financial markets we repeatedly forget”.

#RidingTheRollerCoaster

Understanding the roller coaster – in the words of Charles Dow

Source: Understanding the roller coaster

Read the above post and compare it to what Charles Dow had to say: Each cycle is the peculiar product of a particular moment in economic and political history, but in Dow’s view the force behind each go-round was the same: human nature.

Enjoy the roller coaster!

#RidingTheRollerCoaster