Clients often flock to advisors who “made a good call on the market.” They have the mistaken belief that markets—or things generally—are much more predictable than they really are.
The New York Times reports that Betfair, a London online wagering service, has gathered total bets worldwide of only $51(!) for the U.S. soccer team to win the Confederations Cup. Yet the U.S. team, by virtue of beating world #1 Spain, will be facing Brazil in the final. It just wasn’t supposed to happen.
Financial markets are much the same way. Unlikely or “impossible” things happen all the time. Rather than trying to guess what will happen, doesn’t it make more sense to stop predicting and use a method that adapts as markets change?
