2013 Predictions

It's that time of year again - we have to suffer through anyone and everyone's 2013 market predictions. There's really one way to answer the question, "What's the market going to do this year?"

Anyone can do it, and it takes only three little words: "I Don't Know."

That's it. I don't know. You don't know. The talking heads? They don't know either.

The other day I watched Doubline's Jeff Gundlach being interviewed on CNBC, asked to give his 2013 return prediction for 10 year treasuries: 3%. High yield? 6%  S&P 500? 6%.

Wrong. The answer is "I don't know."

Don't get me wrong, Mr. Gundlach is a smart guy and a very successful investor. He is not, however, blessed with any specific ability to see exactly 12 months into the future. Nobody is. If he ends up being right, it's pure luck, and nothing else.

Now, if you want longer-term return forecasts based on such trivial things as valuation and mean reversion, I would direct you to GMO's asset class forecasts or John Hussman's "Likely Range of Market Returns in the Coming Decade" for some really impressive analysis. But short-term predictions are nothing short of guesses and usually pretty bad ones at that.

So, the next time someone offers up their end-of-2013 S&P 500 closing level, hit the mute button or change the subject. The same goes for people who love to say, "See? I TOLD you that wasn't going to happen!" Because if they're right they just got lucky, and it's only a matter of time before they are really, really wrong.