Some thoughts on the future
Forward-looking stuff
Just a quick thought for this morning but it’s something that I think will be super important as the newsletter continues to evolve.
In general, financial commentary is extremely good at telling you about things that have already happened. There are articles about which sectors are doing well, what stocks have gone up and down, what the economy is doing, how many jobs there are, and so on. That’s great and all but historical information is only so useful for the future.
For example, let’s say I write an article about how Bitcoin hit $50,000. Would that information be more useful if I wrote it today or if I wrote it a year ago? The answer is obvious and, if that were possible, we would all be rich.
The future is notoriously difficult to predict and has a way of making almost all predictions wrong, so a lot of financial commentary tends to only give the illusion of talking about it by pinning their commentary to recent stuff. I do that a lot myself. Things like, “oh unemployment claims were down this week and have been trending down for a few months and, given some speculative other metrics, may continue to trend down.” I could be totally wrong though! It’s all just a guess - even if it’s informed.
Because the future has a way of making a fool out of all of us, predictions are usually vague. That way, when the future does happen, it’s harder to call out the vague predictions for being wrong.
The thing is though, there are a lot of useful tools we can use to paint plausible scenarios for the future that could be really informative. And, if we keep our ego in check and recognize that we will inevitably be wrong, these scenario forecasts can still help guide our decision making in the present toward better outcomes.
So, be on the lookout for more forward-looking metrics. I think having more tangible numbers will be, at the minimum, much more interesting than vague language about what might or might not happen going forward.
Hi Luke! Scenarios is a good idea especially if one can judge their plausibility correctly. One thing, good financial commentary does (again like you said it is an info about something that already happened but informative nonetheless) is letting you know if a future expectation is already priced in the markets or not.
For exemple, Brexit happening the way it happened was already priced in European markets before it actually happened and without any surprise developments the markets didn't get effected as much at the beginning of the year when Brits finally exit the EU (even though all customs struggles, delay and costs of the Brexit started hitting after that point). So I guess good financial commentary talks about the future scenarios and tells you which one of them is already priced in (if any).