We all know that hindsight is 20/20, but of what use is it? For sure, we can learn many things from events that have happened in the past, particularly in predicting the behavior of financial markets.
However the big question is who to listen to when it comes to analyzing previous events or existing information to determine how the markets will behave in the future.
What immediately comes to mind are economists who come up with their own forecasts based on a series of data to predict everything from exchange rates, unemployment, GDP and so on. Having attended economic briefings for the last 35 years, I have yet to meet a popular economist who was unsure of himself and would typically rattle away all sorts of economic forecasts, as if they had a crystal ball that told them everything. What I have learned over the years is that you should get a consensus view of a number of economists and see if there is a commonality in their forecasts.
As a caveat in listening to other people’s forecast or advise, please consider their track record, as well as their personal stature. Allow me to explain this a little bit. When someone has a good batting average in predicting the future, you would tend to trust that person more than say someone who was not as accurate. Unfortunately, this is not always the case, due to hype, PR, image building and outright deception, people sometimes get away
with murder.
Looking at the personal stature of the person making the forecast is very important to me and should be to you, too. It doesn’t take too much of an imagination to think that someone who can predict the future with such conviction would put his money where his mouth is and reap the benefits of such. If they were as good as they think, they would not need to be working for someone else.
Most often, people need to have a combination of knowledge and luck. As an example on record, in this column published on November 4, 2016, I wrote about why you should buy into the Pilipinas Shell Petroleum (SHLPH) IPO, which was listed on November 3, 2016. Keep in mind that I had submitted my article on the evening of November 1, 2016. I had stated that, “My personal opinion is that I like SHLPH because of a number of reasons.” I then went on to elaborate what these reasons were. I further went out on a limb and said, “The share price will cross P80 a share within the year.” That is coming from the IPO price of
P67 a share.
The SHLPH IPO was not a popular one, which was why getting an allocation from your broker was not difficult. As a matter of fact, in my case, I bought from two brokers where I ordered a much larger amount of shares, thinking that my order would be cut down to take into account the strong demand. To my surprise, I practically got everything I asked for. I have to admit at the time when I was making the payment, I was a little apprehensive and tried not to think of the negative consequences of my actions too much.
My column here came out on November 4, a day after the listing of SHLPH and the PSE Index at closing on that day was 7,222.37. As I write and submit my column on the evening of February 1, 2017, the PSE Index closed at 7,227.45 and SHLPH closed at the all time high of P79.75. P0.25 off my “predicted” P80 per share and off by about a month of my P80 per share target by the end of 2016. Am I some kind of a genius who can see the future?
Definitely not, but I had enough knowledge and experience to make a call in the right direction and getting the price and timing that close was just sheer luck! Nonetheless, I will enjoy my gross gain of 19 percent in three months!
I wonder how many people who stand up in front of large audiences making all of their fearless forecasts actually take advantage of their own predictions? In my case “I have put my money where my mouth is, and keeping my fingers crossed.”
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The opinions expressed here are the views of the writer and do not necessarily reflect the views and opinions
of Finex.
Comments may be sent to georgechuaph@yahoo.com.