I Don’t Know

Johnny Carson as the Carnac the Magnificent

I know this blog would be more interesting if I commented on the latest market happenings and posted pretty graphs projecting future returns. Perhaps some latest prediction by an investing guru about the state of the world and what it means going forward. Etc. But I won’t do these things because I don’t believe they are productive. To a diversified investor, these activities are at best a waste of time. At worst, these activities can cause investors to make rushed decisions that could lead to large portfolio losses and market underperformance.

Investing should be dead simple. It should not involve complicated machinations inside your portfolio and relying on a bunch of prognostications about what the markets are going to do. Why? Because the markets are not predictable.

I don’t know what future asset prices are going to do. I don’t know if something is overvalued or undervalued. I don’t know what gold is going to do next week. I don’t know what stocks are going to do in a month. I don’t know if bonds are going to crash tomorrow. Nobody is clairvoyant despite how confident about the future they may sound.

Please do not expect anyone to know what is overvalued, what is undervalued, and whether the Permanent Portfolio will blow up next week because of some unexpected event. No one can possibly know. Harry Browne used to say: “Anything can happen, but nothing has to happen.” That pretty much sums up the issue. Most people don’t go to psychics for life advice so why go to market psychics for investing advice?

The future is unpredictable. You do your best to diversify and that’s all you can do. Invest your money passively, keep costs low, keep turnover low, diversify widely, learn from your mistakes, keep things simple, and expect the unexpected. Doing these things makes it easier for you to say “I don’t know” and be happy with your answer.