Financial Predictions for 2008

Happy new year! I have a few fearless predictions for the upcoming year.

1. Half of all financial prognosticators will correctly guess whether the stock market will go up by more than usual this year.

Of course, the other half will get it wrong. Maybe we would be better off if we ignored people who pretend to know what is going to happen to stock prices in the short term.

2. Interest rates will either go up, or down, or stay the same.

This is a safe one. Some people will pick just one of these three possibilities, but I don’t believe they know what will happen to interest rates any better than the rest of us. I doubt that even the people who set interest rates know for certain what they will do more than a few weeks in advance.

3. Newspapers will continue to print explanations for what happened in the stock market each day.

We see articles with titles like ‘markets jittery amid inflation concerns’ or ‘market rally blunted by corporate earnings pessimism.’ I rarely find these explanations useful in making investment decisions. Smart investors will yawn and ignore these articles.

I wish you a happy and healthy 2008.

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