Pacific Park Financial Inc. | Feb 02, 2013 03:10AM ET
Las Vegas odds-makers believe that the San Francisco 49ers will beat the Baltimore Ravens to win Superbowl XLVII this Sunday, February 3. That’s what is implied by a 4-point spread. In contrast, if the professionals did not feel that the 49ers had a definitive edge, there would neither be a spread nor a so-called “favorite.”
And yet, an equal percentage of gamblers are likely to bet on a Ravens victory. Some will choose the Ravens because they expect the 49ers to win by 3 points or less. Some will choose the Ravens because they expect the team to win outright. Others will choose a team based on little more than a hunch that one squad will prevail.
Why am I bringing up the big game? In part, it’s to illustrate that nobody has any idea who will hoist the Lombardi Trophy. Professional odds-makers, gamblers, grandpas, the guy down the street — there’s not a person who knows how the future will actually unfold. (Note: For what it’s worth, I like San Fran.)
Bringing the conversation back around to the world of finance, how many economists successfully “predicted” that U.S. gross domestic product (GDP) would contract in the final quarter of 2012? I haven’t seen a single credible “call.” Similarly, how many investment gurus expressed confidence that Greece would still be a member of the European Union by the end of 2012? Didn’t an overwhelming majority of folks insist that a “Grexit” was imminent?
Even when a superstar goes out on a limb with a bold prognostication, he/she did not actually know how the future would ultimately play out. Consider hedge fund sage John Paulson. The wunderkind was supposedly prescient for shorting sub-prime loans prior to the 2008 financial collapse. Yet he went on to lose -53% in 2011 and -18% in 2012 — hedge fund category returns that ranked “dead last” and second-to-last respectively.
Predictive powers do not exist. Still, the media frequently ask if I am bullish on this or bearish on that. Yes, I have definitive opinions - I was born and raised in New York, for heck’s sake. On the other hand, my finest quality as an asset manager is understanding how to minimize the loss when I am wrong.
For example, I have been a well-documented bull on Asia over the last 6 months. I used a wide variety of info to make the case for China’s turnaround, and so far, the markets are saying that I am right. Yet one of my favorite countries (Malaysia) in the region ran into political headwinds. Rather than insist that the China neighbor theme would work for every Asia-Pacific player, I exited Malaysian equities; also, I increased my exposure to iShares MSCI Asia excl Japan (AAXJ) as well as iShares MSCI Australia (EWA). In some aggressive accounts, I initiated a position in PowerShares DB Base Metals (DBB), sensing that metals like copper and zinc would play a large role in China’s economic resurgence.
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.