Investment Lessons From the Super Bowl

 | Feb 03, 2014 | 1:00 PM EST
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For anyone except a Seahawks fan, last night's Super Bowl was a huge disappointment. For advertisers, paying more to have your ad run during the second half and even more during the fourth quarter proved to be a disaster. By the middle of third quarter, it nearly became mathematically impossible for the Broncos to come close to winning. I haven't seen the numbers yet, but I've talked to enough people who said they stopped watching the big game during the fourth quarter. 

For bookmakers, the big game was a financial mess. The early line had the Broncos favored by 2.5 points. In other words, as with most Super Bowls, this one was going to be close, but it was going to be Peyton Manning's day. Unfortunately for Manning, the Broncos, Las Vegas and marketing companies, the big game was a big letdown.

There is a lesson for investors and market traders in all of this: When it comes to sports and investing and other endeavors that have probabilistic outcomes, do not take the advice of "experts" as gospel. At the end of an expert's viewpoint is no more than another opinion. 

Sure, experts are those who have been practicing in a field longer than most, but no one has the power of prediction. And in investing, betting on analysts is no more than flipping a coin. Consider Meredith Whitney, who became a superstar for calling Citigroup (C) as a house of cards before the financial crisis hit. She was right and became an expert. She then predicted back in 2009 that the municipal bond market would crash, but that event has yet to unfold. Remember the Internet superstar analysts of the day -- Henry Blodget and others -- who became celebrities after making one strong pick and then faded away?

Always, always take an expert opinion in investment with a healthy degree of skepticism. Warren Buffett, who probably has more skill that anyone at predicting market direction, has never in his 60-year career attempted to time the market. If Buffett can't do it, what makes you think Ivy League MBAs are any better?

It's no coincidence that a company's stock price moves the most when the company reports results that vary from analyst opinion. A company that blasts past estimates sees it share price surge, while a company that misses by a couple of pennies sees its stock price tank.

A lot can be gained by considering the opinion of others. But remember that these opinions come from the same information that is available to you. And those opinions -- like those of Howard Marks in his monthly memos -- can be very intelligent and worth following. But someone's viewpoint is not gospel, and you should not be afraid to question any expert opinion before deciding whether to agree with it.

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