To follow-up on last week's post regarding making money in any market, rising or falling, as long as your predictions are correct I'd like to present my football pool. It's a simple pool, each week selecting the winner of each contest against the spread and assigning a point value based on the number of games. In a typical week early in the year there are sixteen picks, guesses as it were, with sixteen points assigned to your most certain (or hopeful contest) through one point on your least confident or most disinterested contest. Selection of your picks can vary from random, push a button and the computer does it all, to pouring over the sports pages and blogs reviewing injury reports, boastful predictions and shoe contracts. I fall someplace in the middle considering won-loss records, most recent contest results, the home-field advantage and the spread. Throw in a few biases for and against selected teams and voila! Tenth place!
That some pool players are more successful at the process, at least early in the season, seems to indicate that there are sources of information and rational process that yields better results. Replace football teams with 32 investment choices from stock and bonds to commodities and land, financial predictions are not that much different than my football pool. From randomly predicting the future direction of prices of any investment vehicle to in-depth analysis of the financial news channels, blogs and tea leaves if your predictions are correct, regardless of whether your favorite team is going to win or lose, you can make a lot of money...or lose your shirt.
Whether it is my success or lack thereof in football pool selections or a firm belief in the Chaos Theory, where an infinite number of specific initial conditions make predictions of future complex events (e.g., the weather, investments or peak oil) exceedingly difficult, I prefer to play it safe with all of my significant assets. I have worked too hard earning them and have too little confidence in my ability to accurately forecast the future, regardless of how much information I expose myself to, to risk them in arenas where the owners hold all cards, rules and dealers. I think this is preparing for the future the old-fashioned way by saving for it rather than participating in the speculation and gambling that is the financial world we live within.
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