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Tuesday, January 8, 2013

Now What?

Well it's 2013, and the world didn't end last year, despite the efforts of Superstorm Sandy, the Fiscal Cliff and the Mayan calendar.  Now we're stuck having to figure out what will happen this year.  Of course, I believe that this is an impossible task, despite all of the predictions for 2013 that litter the internet.  It interesting that no one ever pulls up all of the predictions for the prior year to see just how wrong they were.  I guess that doesn't sell newspapers (or create Facebook likes).

Of course, one primary reason that economic and financial forecasts are so feeble, is that the economy is such a complex and disorganized thing.  We have noted many times that economists don't even agree on the fundamentals of how the macro-economy works.  Proof of this comes from a recent study by the University of Chicago’s Booth School of Business discussing agreement among academic economists. The Wall Street Journal's article about this study was titled "Man Bites Dog: Economists Actually Agree", while Businessweek's article about the very same study was called "Besides Gold, Economists Don't Agree On Much".  So, two well-respected business publications can't even agree if a study about economists agreeing shows that they agree. 

Thus, we will make no predictions for 2013 except to say that lots of unpredicted things will happen.  We will continue to advise our clients to stick to the plan, not to overreact to short-term events, and to make sure that they have the appropriate amount of "safety" in their portfolios base on their time horizon, risk tolerance, and individual circumstances.  ~FSB