You, me and everyone… We are all are in the business of predicting the future. We do prediction when we cross the street, take a job, invest in the stock market, put money in the bank, sign our kids up for soccer, or go out to lunch. Every decision we make involves a prediction.
Once you make a prediction and act on it, the world “out there” will force you to compare your prediction what what actually happens. Barring a death wish, if you decide to cross the street and then get hit by a bus, you will be forced to an inevitable conclusion. The theory you used for crossing the street needs some serious rethinking.
April 18, 2009: 2:20 PM ET, Alexandra Twin, CNNMoney.com senior correspondent reports… (EXCERPT)
“During the previous three months I was getting panicked calls from investors about the end of the world,” said Jamie Cox, managing partner at Harris Financial Group. “Now those same people are saying ‘we need to get in now before we miss it.’”
Supporting the optimism over the last week has been a rash of not-as-bad-as-expected quarterly results from bellwether companies.
First-quarter so far: With roughly 10% of the S&P 500 having reported results so far, profits are on track to have shrunk 37.4% from a year ago, according to the latest from Thomson Reuters.
The S&P 500 is on track to post its seventh consecutive quarter of shrinking profits, the longest stretch since Thomson began tracking results in 1998.
Although it’s too early to discern the broad trend, “so far we’re seeing some bright spots in the financials, relative to expectations,” said John Butters, senior research analyst at Thomson Reuters.
So what should we make of “not as bad as expected” as a basis for action? Should we become more sanguine when we learn that the theory we have been using to make predictions is wrong?
When outcomes are different from those you expect it is not time to invest more on the basis of the theory that has misled you. It is time to rethink your ideas about how the world works!
“There is no substitute for knowledge.”
W. E. Deming