You've all heard stories about professional investors underperforming index funds, but economists Ron Acquits, Lutz Kilian, and Robert Vigfusson took this humiliation to the next level. The trio showed that forecasts of the price of oil one year out made by the Energy Information Agency and survey firm Consensus Economics were no more accurate than just assuming whatever oil's price is today is what it will be next year. Literally, not having any forecast was as accurate as a professional forecast.
What is true for oil is undoubtedly true for economic growth, corporate earnings and industry trends. Most of us can't stand the thought of it, but anyone looking honestly at the evidence knows we are spectacularly awful at predicting the future.
This might seem disturbing to investors. How do you invest in the future while holding a nearly fatalist view that we can't predict the future?
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