Being Wrong

The brilliant Peter Bernstein (author, historian, and economist) once wrote:

After 28 years at this post and 22 years before this in money management, I can sum up whatever wisdom I have accumulated this way: the trick is not to be the hottest stock-picker, the winning forecaster, or the developer of the neatest model; such victories are transient. The trick is to survive. Performing that trick requires a strong stomach for being wrong, because we are all going to be wrong more often than we expect. The future is not ours to know. But, it helps to know that being wrong is inevitable and normal, not some terrible tragedy, not some awful failing in reasoning, not even bad luck in most instances. Being wrong comes with the franchise of an activity whose outcome depends on an unknown future. Maybe the real trick is persuading clients of that inexorable truth.

So, we were on Fox Business News last Friday with the sagacious Neil Cavuto. He noted President Obama’s comments that the economic recovery was created by him, but that President Trump is taking all the credit for it. Neil then asked us, “Do you believe that?” We responded, “That is a fair point, but we think the Fed should be given a lot of the credit for keeping us from a depression.” A few minutes later he asked what we thought of the stock market. We responded (as paraphrased):

Well, we have had a pretty good call on the equity markets this year. We recommended raising some cash in late January, suggested putting that money back to work after roughly an 11% decline by the S&P 500 (SPX/2871.68) near its February 9 low and we were looking for new all-time highs. Mission accomplished! Subsequently, two weeks ago tomorrow, after tagging those new all-time highs, we wrote that the SPX was likely going to stall, but we did not think the SPX would trade below its 2890 – 2900 support level.