Understanding the present is our most important goal

  • The individual forecast may be reasonable, but it comes with a margin of error.
  • Even in a simple model with few variables, the cumulative error in most forecasts makes them too inaccurate to predict the performance of a wide range of asset classes, over anything but the very short term.
  • The greater the number of forecasts, the larger the potential error.
  • The further we look into the future, the truer this becomes.
  • Does anybody really believe long term weather forecasts?