A young man reads a newspaper in his kitchen with a cup of coffee in hand. Consumers of information should be wary of experts - because they can be wrong, and are often.

    A few weeks ago, I predicted that the election would be contested and the uncertainty would cause rates to fall.

    And, today, the day after the election, there is tremendous uncertainty and rates fell.

    I was lucky with my prediction and merely repeating what I was reading across the blogosphere.

    And – things could have easily gone the other way with a big victory for either candidate.

    And that leads to my other observation: nobody knows what is true anymore. 😊


    Most of the major polls indicated that Mr. Biden would win a sweeping victory, and almost all of them were not just wrong but very wrong.

    Why are “experts” wrong so often?

    I’m no expert, so I’m not sure. 😊

    I will throw out a few thoughts though:

    1. Rise of podcasts, blogs and cable news excessively focused pundits: The rise of these channels has created an entire industry of so-called experts or pundits. But, according to this Forbes article – Why Experts Get It Wrong – many so-called experts focus so heavily on their chosen field that they miss major influences outside their field. Famous Example of Wrongness: This is somewhat of an aside, but so interesting it is worth sharing. The Forbes author reminds us that in 1798 Thomas Malthus predicted mass starvation b/c the world’s population was outpacing the food supply. In 1968, Stanford Professor, Paul Ehrlich, predicted the same thing when the world’s population was 4 billion. Today, the world population is over 7 billion, and there is less starvation than ever.
    2. Artificial Intelligence: Many cultural observers believe that artificial intelligence (designed to garner clicks, leads and ad dollars) is already influencing us in ways that we don’t understand, and making things move in ways that experts cannot begin to predict.
    3. Confirmation Bias: This is a factor that Russ Roberts of Econ Talk fame illuminates often, pointing out how many experts draw conclusions prematurely and then use every data point to justify their conclusion, whether right or wrong.
    4. Politicization of Everything: This is another factor that weighs more heavily than ever, but many so-called experts have a political ax to grind. Their opinions are therefore often swayed by their need to corroborate a political position.
    5. An Activist Fed: The Fed has been much more of an “activist” organization since Greenspan became Chairman in the late 1980s. In other words, the Fed has tried to influence the economy more than ever before with interest rate movements, policy statements and Quantitative Easing, among other things. But, the unfortunate byproduct of this is bubbles (Asian Contagion, Dotcom, Housing, etc.) and very unpredictable economic events.

    So why harp on this again?

    People ask me all the time what I think will happen to interest rates and the housing market.

    And, I repeat the mantras that rates are expected to remain low and that the housing market is expected to continue to rise.

    But – not only could I be wrong, I expect events to come out of nowhere to upend all predictions.

    In light of this, should everyone just sit on the sidelines waiting to see what really happens?

    Not at all, and that is the primary point of this blog.

    I see people get stuck in analysis-paralysis all the time, trying to make the perfect investment and business decisions.

    But, the exceptional level of uncertainty nowadays can render even the most learned and detailed analyses a complete waste of time.

    My recommendation remains to simply adhere to old-fashioned principles: (1) don’t over-extend; (2) hang on to some liquidity at all times for reserves; (3) remember that action is better than inaction; (4) ignore experts and predictions of doom and gloom; and (5) expect major disruptions.

    Jay Voorhees
    Founder/Broker | JVM Lending
    (855) 855-4491 | DRE# 1197176, NMLS# 310167

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