Thursday, October 14, 2010

Why Wathching the Financial Media May Be a Waste of Your Time

By Larry Swedroe

This year, I wanted to keep track of some of the predictions made by the financial media at the beginning of the year. In April, we noted that there were five big financial predictions made by investors and commentators for 2010:

  • Gold would rise.
  • Bond yields would rise.
  • The dollar would fall.
  • Inflation would be rampant.
  • Real estate was the asset class to avoid.

Here is where things stand right now. (For previous updates, see the links at the bottom of the post.)

We began the year with gold at $1,113. At the close of Sept. 30, it was trading at around $1,309.

Bond Yields
The 10-year Treasury note began the year yielding 3.85 percent, and, like gold, it was unchanged in April. As of Sept. 30, the yield was 2.51 percent.

The Euro began the year trading at around $1.44 and fell to about $1.35 in April. As of Sept. 30, it was around $1.37.

The monthly percent changes in the CPI this year have been: 0.3, 0.0, 0.4, 0.2, 0.1, -0.1, 0.0 and 0.1.

Real Estate
The Vanguard REIT Index Fund (VGSIX) was up about 11 percent April, when I first ran an update. For the year through Sept. 30, the fund was up about 16.51 percent.

The message remains the same: The bottom line is that out of five sure things, only one has so far turned out to be right. And, despite all the problems we have faced this year — economic and political, domestic and international — equity markets around the globe have held up fairly well. Despite all the academic evidence demonstrating you’re best served by ignoring the so-called experts, most investors continue to base investment decisions on economic and political forecasters.

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