Feb 2023
Yogi Gets it Right Again
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When Jamie Dimon, CEO of JP Morgan, famously forecast an “economic hurricane” on June 1, 2022, it made headlines around the world. Broadcasters noted that as the CEO of one of the world’s largest financial institutions, he was uniquely positioned to see economic vulnerabilities...credit card data, corporate loans, mortgages, etc. However, it appears that Jamie should have listened to Yogi Berra, who said, “Predictions are hard, especially about the future”.

So far, the economy has been solid. Recently, Jamie backed off his ‘hurricane’ prediction, suggesting that the positive but slowing economy was simply “hit by a bit of a storm already”. Not quite the “Superstorm Sandy” image he suggested last year.

One thing that is guaranteed to bring headlines is a prediction of doom & gloom by someone that has had some prior success. Jimmy Rogers, a partner with George Soros in the famously successful Quantum Fund in the 1970s, has spent the majority of the last 40 years making headlines by predicting disaster on Wall Street. He also moved his family to Singapore in 2007 because of his view that China was the world economic driver and investors should be close to the action. Oops...China has been a very poor investment market since then. Not much of his crystal ball vision has been correct. Yet he still will get press.

It’s a similar story for Jeremy Grantham, who has accurately noted that the stock market valuations in the US are higher than average...since the 1990s. Recently, Jeremy, “the man who predicted the 2008 and 2022 market declines”, has garnered headlines for predicting a near term “market crash of 50% in US equities”. He has been consistently bearish on the US market, with big headline warnings in 2005 and 2012. Subsequent market returns were good for several years before the big downturns of 2008 and 2022. Thus, he was not quite right but not quite wrong if you waited long enough.

The maxim of “a stopped clock will be right twice a day” is operative here. As for his overall forecasting accuracy, we note that he made well publicized bullish calls on commodities in 2011 and emerging market equities in 2018. In fact, he stated in 2018 that he had placed 55% of his family’s asset in emerging markets. Both calls were dead wrong. Oops again...

So, did/do I disagree with Jeremy, Jamie and Jimmy? Not really- they are all intelligent people with every right to their own opinion.

Without a doubt, there will be economic hurricanes, stock market declines and other negative events in years to come. My disagreement would be with any forecast that leads to a market timing decision. Getting the timing right is hard to do once and impossible on a consistent basis. It is better to ground your investment strategy in more reliable ways- opting for a consistent approach with diversified exposures that are rebalanced occasionally back to a comfortable risk profile. Of course, that statement wouldn’t sell newspapers or gather many internet clicks. I guess the only prediction I will make is that we can expect a continued barrage of dramatic pundit predictions in the future.


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