An excerpt from here:
When markets become tumultuous, which is often, lots of people pop up to explain what’s going to happen next. Many of their arguments are highly plausible. Sometimes they’re well written. Occasionally they’re both. Unfortunately, unless physics is completely wrong and time travel is actually possible they’re all engaged in an activity we usually call ‘guessing’.
Although this is often entertaining, spending a lot of time reading this stuff is pretty much a waste of time when it comes to investment. After all, in 1939 markets completely failed to take account of the possibility that Hitler might run amok in Europe despite small hints like the invasions of the Rhineland, Austria and Czechoslovakia. As we saw in Why Markets Crash they didn’t spot the First World War either: so a perfect record when it comes to global conflagrations, then.
Meanwhile, in 1987 stock markets collapsed for reasons no one has yet been able to agree upon, let alone figure out how to predict (see Black Swan Down). In fact, if anything, if you and I can see a crash coming there’s a reasonable chance even the buffoons that run the world’s finances might manage to avoid it.
Although it’d be best not to count on it.
The ultimate tonic to all of these predictions that lead nowhere? The ultimate non-guessing investment strategy? Trend following. Read one of my four books. Tell me where I am wrong. After you do that–tell me how your old way is still better.
Hat tip to @ritholtz for article find.