Economists and Wall Street gurus call it predicting, but the more accurate words for it are wishing, hoping and praying. Despite overwhelming evidence that it is impossible to consistently predict the future, it is the primary product that Wall Street sells to its clients.
The financial media is comprised mainly of two things. First is reporting about what is actually happening. "The indexes had their biggest drop in six months" or "XYZ company report earnings of 55 cents per share." That can be quite helpful and gives us some insight as to what is moving the market, but the second focus of the financial media is a parade of experts and pundits who claim to know what the future holds.
It is these experts who garner the most attention because they provide investors with the illusion of control. If we know what the future holds, then we don't need to worry. We just need to sit and wait for it to happen.
When we start embracing hopes and dreams, then we sacrifice our most powerful investing tool, which is control. Instead of cutting losses, taking gains and developing a strategy for an unknown future, we sit there and wait for the predictions to come true.
Predictions not only can be wildly misleading, but they make us lazy. Why not just go sail on our yachts while we wait for this price target to be hit or this set of events to unfold?
The primary thing that makes bear markets so miserable is that hopeful expectations about the future are not fulfilled. There are constant disappointments as predictions about better action fail to develop, which creates misery and leaves us unprepared for the better action that will eventually occur.
The most powerful thing that an investor can do is embrace the idea that they don't know what the future holds. Once you recognize the futility of making predictions and start ignoring all the pundits and experts who pretend that they know what will happen, then you are ready to react quickly and decisively as conditions actually change.
Staying vigilant and reacting to changing market conditions as they develop is more work than making a prediction and then waiting for it to occur, but it allows you great control. You will make many mistakes and will suffer losses, but you aren't at the mercy of vague hopes and dreams that may never occur.
Once you shift to a reactive approach and away from hopeful anticipation, your energy is focused on developing strategies and tactics rather than just dreams about the future.
I not only have absolutely no idea what the market is going to do in the months ahead, but I also don't even want to try to guess. I want to put all my focus and energy on watching the market and looking for clues about how things are shifting and developing. My time and energy are spent on being ready to react, and when the market starts showing signs of better action I will move quickly and decisively. If I'm wrong, then I reset and try again. I know that eventually my timing will be right and I will profit handsomely.