February 17, 2017

Stern's humble yet expert forecast for 2017

At this time of the year, forecasts for 2017 can be seen and read everywhere. What is astonishing to see is how little the experts were able to correctly predict last year. Nevertheless, forecasts remain popular, especially among investors.

I hardly pay attention to these predictions, especially after reading Peter Lynch's book "Beating the Street". Lynch explains how he annually met the 30 largest investors in New York at the invitation of the renowned publishing house Barron and made forecasts for the coming year.

Not one of the experts' forecasts even came close to being accurate. This is Peter Lynch's statement in his book, not Dr. Stern's!

To further the point, in 1987 (before a very big market crash), the forecasts from the Wall Street luminaries couldn’t have been more optimistic and predicted the best year of the decade. Obermatt CEO Hermann Stern remembers well his father's long-time investment advisor telling them in June 2009 that they will never make any money investing in stocks again. In reality, June 2009 was clearly the best entry point for stock investing in decades.

Philip Tetlock, a professor at the University of California Los Angeles (UCLA), investigated the matter scientifically and analyzed 80,000 expert forecasts. His conclusion: a roll of the dice is a better predictor of the future. Ironically, the more famous the "expert", the worse their predictions have been. On the other hand, those who were less renowned have had better results with their predictions.

The reason? Society and economy are simply too complex to make accurate predictions. This is the illuminating opinion of Nobel laureate Daniel Kahneman.

So, why would Dr. Stern dare to make his own prediction? First, because everyone has to think about their priorities, and second, because you, as a reader, are in a better position to evaluate him. So, what is his strategy in 2017?

First of all, he doesn’t have a lot of trust in today's investment possibilities and will only make necessary investments in new assets. This is also why he has paid off a large part of his mortgages. In addition, he is planning to invest in equities again in 2017, because it is important to do this consistently every year. Because of the payments for my mortgages, he will have less money available to invest in the stock market than before.

Dr. Stern will not enter the US market in 2017, because he thinks the North American markets are still too expensive and the prospects for the US economy have deteriorated with the election of Trump. This is his personal opinion, not a prognosis. And he will stay true to his opinion, even though he is probably wrong.

He continues to believe more in Europe than in other regions, because he has more confidence in free, social market economies than in authoritarian societies, no matter how cool their bosses are. Europe is still the gold standard for him, even though he wishes it could be even better.

For the pure pleasure in its technology, he has bought Bitcoin over the last fifteen months, in a position that represents about 2% of his assets. He doesn't care if the money disappears, but the hope and prospects bring him a lot of joy. He personally believes in Bitcoin, but his opinion is in the minority.

For the first time in his life, Dr. Stern created a small gold reserve out of small gold bear relics he keeps in his safe, which only represent 1% of his assets. He doesn't expect any return, because, by definition, gold does not yield a return. Gold is only an emergency solution in case of natural disasters and he uses this primarily for the protection of his family.

In summary, this is what 2017 means for Dr. Stern: lower leverage (fewer debts) and fewer new investments and a little bit of speculation on Bitcoin, a personal passion.

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