My Annual, “No Prediction for Next Year”, Letter

This time of year, print and all forms of electronic media run their investment predictions for the coming year. Every decade they really ramp up their efforts with predictions.

Back when I was providing market commentary on WHO Radio for Piper Jaffray & Hopwood (and later for Dain Rausher) it was my job to do likewise, but truth-be-told I always managed to not make any actual predictions related to price and time in my annual recap. Not even on the eve of January 1st 2000 was my producer at WHO able to coax one from me. As I said then, “it’s easy enough in this business to look stupid without looking for trouble”.

All true, but there is more to my reticence than not wanting to look foolish and it’s this: investment professionals are not clairvoyant soothsayers and probably shouldn’t make pronouncements like so many carnival barkers. We don’t know where markets are headed. We don’t know who is going to win the presidential election and we shouldn’t be making predictions just because our clients find them entertaining. These days, that’s what professional journalists are for.

A recent example demonstrates the futility of these predictions. A few years back a tsunami in the Pacific Ocean caused a tidal wave to form. The wave found itself to the shores of Japan where it knocked out two nuclear reactors resulting in substantial loss of lives and property. A great tragedy never before experienced except in science fiction movies. At this point financial markets collapsed worldwide.

Want to guess how many market pundits predicted that happening the prior December... that’s right, exactly zero. By the way, this is not something covered in our finest business schools either; at least I don’t remember anyone covering the “Godzilla Bear Market Case Study”.

Here is what we can expect in 2020. Stuff is going to happen, weird stuff, stuff we didn’t see coming and so it’s best to be ready.

That’s why at Iowa Wealth Management we preach and practice diversification. We build prudent portfolios where we focus our equity holdings in blue-chip dividend paying stocks. The reason we do these things is because we don’t know what’s coming. We always want to be ready to ride out whatever comes our way because we always want our clients to be long-term investors and as such they will have their opportunity to reap the rewards of the long-term investor.

By the way, the year of the “Godzilla Bear Market” (March of 2011) markets rallied to finished flat for the year…. Go figure.

 Past performance is no assurance of future results. Iowa Wealth Management is a registered investment adviser with its principal place of business in the State of Iowa. Opinions expressed are those of Iowa Wealth Management and are subject to change, not guaranteed and should not be considered recommendations to buy or sell any security.