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July 2023 Newsletter - Nobody Knows Nothing

July 2023 Newsletter - Nobody Knows Nothing

June 26, 2023

Dear First Mates,

I hope you are enjoying your summer. Constantly, I hear dire financial forecasts on the news, and I find myself shocked by the confidence of these pundits and shaken by the impact their words could have on the average investor. In fact, these experiences prompted me to reach out to you today.

I have a simple – and hopefully, reassuring – message for you: media pundits and so-called financial experts are wrong most of the time. In fact, I initially planned to share just a few examples of inaccurate financial predictions with you, and I was able to write down ten off the top of my head. That’s how often these predictions prove wrong.

I encourage you to take a look below at my list of these inaccurate historical predictions and remember that, ultimately, no one knows exactly what will happen with the economy. The best protection against short-term concerns is a combination of healthy skepticism, a long-term approach to investing, and a diversified portfolio. 

I hope this is helpful context for you. Feel free to reach out with any questions or concerns. I’m always here as a resource for you!

Hall of Fame of Bad Financial Predictions 

1929: Economist Irving Fisher says stock prices are reaching “what looks like a permanently high plateau.” Three days later, the economy collapses, and the Great Depression begins.

1973: Professor Herman I. Liebling coins the term “soft landing” in his prediction for what will occur in the mid-1970s. Instead, unemployment reaches 9% and GDP shrinks 3.2% during a 1973-1975 recession.

1979: BusinessWeek, a precursor to Bloomberg Businessweek, publishes a cover story declaring “The End of Equities” due to rising inflation.

1987: Economist Ravi Batra predicts a coming Great Depression in a book that reached #1 on The New York Times Bestseller List. No such depression occurs. 

1988: Economist Paul Krugman says the Internet will have no impact on investing.

1999: Economists James Glassman and Kevin Hassett predict in their book Dow 36,000 that the market was only at the beginning of a meteoric rise, with the Dow set to hit 36,000. In less than two years, the Dot-Com bubble bursts, and the economy enters a recession. Not to be outdone, Charles W. Kadlec writes Dow 100,000, predicting the Dow would reach 100,000 by 2020. It remains under 35,000 as of April 2023, following a peak of 36,799.65 points in January 2022.

2004: Fannie Mae calls subprime mortgages “riskless.” Four years later, this mortgage type contributed to the worst economic downturn since the Great Depression. 

2007: Goldman Sachs chief investment strategist Abby Joseph Cohen predicts the S&P 500 will hit 1,675 by the end of 2008. It ends below 900. Also this year, Federal Reserve Chairman Ben Bernanke claims the housing market is stable

2008: Commentator Ben Stein says at the beginning of the Great Recession: “You can panic if you enjoy being panicky. But this will all blow over and the people who buy now, in due time, will be glad they did.” 

2010-2017: Out of 62 “surefire” market predictions made, 17 are right, according to a 2017 study.

2020: The World Bank predicts COVID-19 will send the economy into the worst recession since World War II. The recession lasts two months. 

2022-2023: MSNBC commentator Jim Cramer recommends both Silicon Valley Bank (SVB) and Signature Bank stocks. Both banks fail within the year.

2023 – Chief IIF Economist Robin Brooks announces Bitcoin’s death on March 14, marking the 473rd time such a declaration has been made (without it actually occurring).

2024 – Inevitably something else.

Dave's Picks

Finance YouTube vid o' the month! 

  • Rob Berger tackles this question: What happens to our investments if Schwab, Fidelity or Vanguard collapses?  

Interesting YouTube vid o' the month! 

  • Frank Abagnale interview on Johny Carson. He was the person they made the film, "Catch Me If You Can", about. Really interesting to learn about the life of a con man. 

Fun YouTube vid o’ the month! 

  • Daily Dose of Internet - I can't wrap my head around AI showing your dreams!

Music track o’ the month! 

Read o’ the month! 

  • "Oliver Burkeman's: the eight secrets to a (fairly) fulfilled life"