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Showing posts from May, 2016

Predicting The Future of Future Expectations

“I'm fascinated with the problem of why really smart people have such a hard time predicting the future. It is mostly because the future is more random than we think. But it's also because future performance (like earnings and economic growth) doesn't tell you half of what you need to know to predict future outcomes.”
The above was taken from a recent and insightful article entitled Performance Vs Outcomes (Morgan Housel, The Motley Fool). The author described and provides examples in the world of investing that successfully picking what will do well requires not only predicting what may happen in the future, but also out predicting what everyone else’s expectation of what the future will be as well.

In other words, to be successful with investing, it’s not only necessary to predict what may happen in the future, but also to evaluate whether the rest of the market is already pricing in that same expectation, or not. For instance, we’ve long known that soda consumption i…