by Tom Bradley

It’s human nature to look for insight and foresight in wild times like we’re experiencing now. We understand that the future is uncertain and random, but nonetheless, we demand clarity and precision.

Howard Marks (Oaktree Capital), in one of his recent letters, provides warnings to those who are looking for a view to latch on to. Two paragraphs are worth highlighting.

[1] "... (a) true expertise is scarce and limited in scope, (b) expertise and predictive ability are two different things, and (c) we all should be careful about whom we listen to and how much weight we give to their pronouncements."

This warning label is particularly important at extreme times in the stock market because that’s when everyone becomes an economist. Dinner party conversations (which look a little different these days) and the media are full of high conviction views about how the world will unfold.

[2] "Further, in considering expertise, we must be leery of some dangerous tendencies in our society:

  • to confuse general intelligence with knowledge of the facts relative to a given field,
  • to confuse factual knowledge with superior insight,
  • to conflate expertise and insight with the ability to predict the future,
  • to treat experts in one field as if they’re knowledgeable about all others, and
  • to credit rich and successful people with all of the above."

The only thing we know for sure as we look out over the next year is that the possibilities are endless. Humans are very adaptable and could skate through this surprisingly well. Or the burden of debt, desire for safety and lack of international trust may cause the recovery to be halting and full of surprises.

We should be prepared for a broad range of outcomes. It’s not the time to bet the farm on one view of the future.