Perfect hindsight

Predicting the future is hard, really hard, if not impossible and yet it is most investor’s favourite pastime. We are all terrible at forecasting whether we acknowledge it or not.

“It’s tough to make predictions, especially about the future” – Yogi Berra

Most of the predictions that we remember are the ones that are completely left field, wildly unexpected and then came true. Unfortunately, there is a perverse incentive by the person who made a prediction that he was right by reminding everyone that he or she saw it coming.

Nouriel Roubini comes to mind here. Roubini also predicted the “perfect storm” with the collapse of the Euro in 2013, only for the MSCI World to rally 27% that year (just as an aside, Roubini started calling for a US recession in 2004 already, you know what they say about “broken clocks”…)

We are however not writing about what economic pundits or doomsayers got wrong as yours truly didn’t see the Great Financial Crises coming before it happened in 2008. We are interested in what perfect hindsight saw at the end of this decade and will see at the end of the next.

Below is a list of our top 5 things that almost no one predicted in the past decade, but in hindsight you should have (or wish you did). In random order:

  1. Brexit – The withdrawal of the United Kingdom from the European Union
  2. Donald Trump being voted as the President of the United States (you might as well add here… Donald Trump finishing his term as a President of the United States?)
  3. Leonardo Di Caprio finally winning an Oscar (coincidence that these first three all happened in 2016?)
  4. United States of America losing the prized AAA credit rating from S&P (the US did raise their debt ceiling from $6trn to $14trn and they have raised it to $22trn since…)
  5. Capitec’s share price boom. All the way from R78 at the start of 2010 to the current price of R1,424

Now the question comes to what we all will see perfectly in ten years-time:

  1. SA Inc shares were so depressed and under performed for such a long time, a rebound was long overdue
  2. It was never a good idea to track a benchmark with such a large exposure to one share… (#Naspers/Prosus – I must admit, this is my personal favourite).
  3. With debt at more than R440bn and a net loss in 2019 of R21bn, it was inevitable too that we had load shedding on a daily basis for the past decade (or we can say, inevitable that Eskom collapsed completely. I’m choosing the glass half full option).
  4. What a difference the privatisation of an airline makes!
  5. Everyone knew the US Tech giants were too expensive and already had their time in the sun.

How this decade will play out will of course be very different. The world is too random, intricate and complex. The amount of chaos involved and the feedback loops on events are incalculable. We therefore need to stay disciplined and prudent in our long-term investment decisions.

A reminder, at Methodical we don’t try to predict the future, as Lao Tzu said “those who have knowledge don’t predict, those who do predict don’t have knowledge”

All the best for 2020!





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