True Headlines That We Will Never See

True Headlines That We Will Never See

For those of you who use Twitter, a very informative and somewhat controversial contributor is Josh Brown from America (@ReformedBroker). He published the above “mock newspaper headlines of true headlines” we will never see.

Investors celebrate as stocks to on sale

Whilst people generally love a bargain and can camp overnight outside stores and lose all semblance of manners and decorum to gain access to unbelievable bargains, when stock markets crash (creating the same bargain prices) investors will stay away in their droves. On the other hand, if shares have gone up dramatically investors will usually see this as a buy signal. Imagine the ridiculousness of customers queuing to get into Woolies because they have doubled their prices. For some reason, perception of value changes when looking at stock market investments.

Economic forecasts for next year: The future is STILL unknowable

Whilst economists are paid huge salaries to give forecasts on everything from the maize price to forex rates to budget deficits, the simple fact of the matter is that nobody can predict with any amount of certainty what is going to happen the next day let alone the next year. If I could have R 10.00 for every time I have been asked to predict an exchange rate, interest rate or stock market trend, I would be a lot richer than I am at the moment. The fact of the matter is that nobody can see into the future. Like an economist, what I can give you is my best guess based on past experience, my own biases and influenced by my vested interests. Whilst for some strange reason forecasting gives comfort to people in general, it actually offer very little value and should be viewed with the utmost caution and sceptism.

Markets fall for reasons no one can be sure of

Hindsight is 20:20 vision and it is always very easy to explain why things happen after they have happened. After any major market movement, the “gurus” will be out in full force explaining exactly why the movement occurred. There are always a lot less “gurus” who can tell you with certainty before an event what is going to happen and why it is going to happen. The simple fact of the matter is that markets are influenced by a combination of supply and demand, information flow, sentiment and a host of other factors. It is usually impossible to pinpoint exactly why an occurrence happened and it is even more difficult to extrapolate past experiences into future events.

The unfortunate truth is that when confronted with difficult (negative) markets, rational behaviour seems to disappear. It is in times like this that the Financial Advisers role is really important in keeping clients focused on their long term goals whilst ignoring the short term noise often created by sensationalist headlines.