What’s in the Box?

December 15th 2015, by Garrison R. North

When I was a child, I was very impatient. Those of you who have energetic children and grandchildren can probably relate to the immense energy inside a young child. My impatience showed itself in guessing what was inside my Christmas presents. I loved to shake and examine my gifts, trying to figure out what was inside before I tore through the wrapping paper. Sometimes I was able to guess what was inside, but more often than not, my guesses were not accurate. Even though I could analyze the gift in various ways, I didn’t know what was inside until I actually opened it.

At this time of year, we are bombarded with “expert” market predictions in the financial media, most of which are touted as a “2016 Market Outlook.” At the end of these articles, the writer usually predicts a rate of return for the market for the coming year. You can read many different outlooks and get many different predictions. These predictions are much like our Christmas gifts. We can shake, analyze and decipher all we want, but we won’t know what is inside until the wrapping is off. In the case of the market, we won’t know its annual return until the year has ended. Without fail, a few of these “expert” predictions will be correct, but the vast majority will be wrong simply because all of these predictions are merely guesses.

A recent example of this comes from “expert” Jim Cramer, host of CNBC’s Mad Money. Cramer makes many, many stock predictions. Recently, David O. England, a retired finance professor, decided to put Cramer’s predictions to the test. He bought $1,000 worth of each security on Cramer’s list of “49 Stocks to Buy Right Now” and tracked their performance over a 6 month period. For that period, the S&P 500 returned -3.88% while Cramer’s picks returned
-7.09%.

At Master’s we do not believe in market predictions, but rather in sound fundamental financial principals. We believe a principled investor will always trump a speculator over the long run. So this Christmas, don’t focus on guessing what is inside your wrapped package or what the market will do next year. Focus on your family, friends and faith, and appreciate the giver of whatever is in that beautifully wrapped package.

Source: MarketWatch.com, October 22, 2015, Jim Cramer Loses Big in this Stock-Picking Test.