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Editor's Letter: Don’t Try to Be Nate Silver*

Here at REP. magazine and, we receive loads of books each year on finance, investing strategies, business, leadership and other how-to-invest-in-various-financial-instruments books. The ones I like best are the ones with predictions, books about the future, such as The Roaring 2000s: Building the Wealth and Lifestyle You Desire in the Greatest Boom in History, by noted prognosticator Harry S. Dent Jr. It was a New York Times bestseller, according to the book’s dust jacket.

I like to pick those books off the shelves periodically and read a chapter here or there, just to see how right their predictions were. Especially as the end of the year approaches, it really is fun to check out what the smart money was predicting.

The Roaring 2000s was published in 1998 and then later re-published in 1999. In that book, Dent couldn’t have called a market top any better! On Jan. 31, 2008, the Dow Jones Industrial Average closed at 12,650.36. On Nov. 26 of this year, the DJI closed at 12,967.37. (I particularly liked the “Next Great Population Shift and Real-Estate Boom” section of the book, by the way.)

Not surprisingly, Dent later followed that book up with, The Great Depression Ahead: How to Prosper in the Crash Following the Greatest Boom in History. That was published on Jan. 6, 2009. Wrong again. On Feb. 27, 2009, the Dow Jones Industrial Average hit a low of 7,062.93; as of the Nov. 26 close, that’s worked out to an 83.6 percent gain.

I am not picking on Harry Dent Jr. Predicting the future is awfully difficult. I wouldn’t venture a guess. Well, that said, I still believe the U.S. federal government’s gross debt of around $14 trillion will likely dampen our economic growth within 10 years. I get those numbers from the Peter G. Peterson Foundation. Peterson is the co-founder of the Blackstone Group; his 1999 book Gray Dawn: How the Coming Age Wave Will Transform America—and the World turned out to be pretty spot on, as did his 2004 book Running on Empty: How the Democratic and Republican Parties Are Bankrupting Our Future and What Americans Can Do About It.

I guess what I am saying is people (even many FAs) tend to forecast naïvely, that is taking recent trends and projecting them into the future. I agree with Howard Kurtz, author of The Fortune Tellers: Inside Wall Street’s Game of Money, Media and Manipulation. As financial advisors, be careful before following media blitzes and Wall-Street-driven publicity bandwagons.

As an FA, I would stay away from predicting market returns, much less selling your services based on your returns. But you know that—smarter to help clients set goals, figure out a financial plan and invest according to their risk tolerance.

That reminds me. Just a few years ago, after the experience of the “roaring 2000s,” prognosticators were saying diversification was dead. MPT is flawed; markets, asset classes worldwide were now correlated. In July of 2009, our cover story was “Everything You Know About Asset Allocation Is Wrong.” Hmm.



David A. Geracioti


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