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Bill Bergan holds the dubious distinction of having the lowest-ever career batting average in Major League Baseball history (non pitcher).  Batting a mighty .170, Mr. Bergan could be counted on for his defense.  His hits, when they occurred, were more of a pleasant surprise.  Offensive excellence in baseball is generally defined as one hit a little less than one out of every three at bats.  In many other professions (surgery, for example), even this heightened level of success would be considered unacceptable.  Mr. Bergan was, therefore, fortunate in choosing a profession where success occurs the minority of the time.

There are few professions where one can make a career by being incorrect the majority of the time.  Success demands consistent outperformance.  This axiom holds true with three noted exceptions in addition to baseball players: meteorologists, financial celebrities and, of course, economists (not all economists, just those who attempt to tell the future.  Ok, almost all economists).  Being consistently wrong in these potentially well-paying professions isn’t just unusual, it’s expected.  Being correct just once, particularly just prior to a major financial event, can be the spring-board to a life of fame and acclaim. 

Unfortunately, there are quite a few of us who place bets based on wisdom gleaned from predictions in a financial column, an economist’s outlook or a television segment.  However, the audience is sorely lacking in two crucial pieces of information: 1) the career batting average of the person behind the crystal ball and 2) the awareness that this opinion is almost exclusively considered to be entertainment.  If someone truly knew how far the Dow would rise in the next six months, why on earth would they give away that information through their newspaper/website/tv show?  Some of the most egregious examples of bad predictions leading up to the 2008 crash are captured in these pieces (Bloomberg; NYMag).

Also frightening is that one prediction may compel another, even more outrageous version.  Everyone loves to quote Economist A when he predicts the market will drop by half, until Financial Celebrity B then confesses that he sees the potential of a 75% drop.  This, in turn, inspires Economist C to grab her share of the limelight by going the opposite direction and foreseeing a 60% rise.  It’s hard to fact-check an opinion, particularly if it’s open-ended.   

That’s right, the best predictions are those with no expiration date (at least from the point of view of the one making the prediction).  Case in point: this financial celebrity recently predicted – without providing any time frame  – an even greater upside for gold.  His prediction was posted just before a 10% drop in the value of gold over the ensuing 72 hours.  The good news, at least for him, is that the lack of a time frame allows him to play both sides.  Gold went down, sure, but he can always say that he was talking about the year 2012, or 2025.  Had gold immediately gone up, he would have added evidence of his clairvoyance.

A solid financial plan and a directly-related asset allocation tailored to your specific financial situation is one way to prepare for the future – though this route requires an investment of time and money.  On the other hand, a quick read of the predictions of a financial company posted on a website takes just a few seconds and costs nothing at all (as long as the predictions come true).  As a test, let’s see where this particular set of predictions for 2011 come out on January 1, 2012.  Hopefully they are batting a bit higher than .170.

Marshall J. Cobb, CRSP, is president and founder of Cobb Retirement Solutions, LLC., an independent, fee-only firm offering qualified plan analysis and oversight exclusively to corporations and organizations. Cobb’s first-hand knowledge as a veteran representative of retirement plan vendors beginning in 1990 gives him a unique perspective as he advises his clients.  Cobb runs his office -- based in Houston, Texas -- with employees and clients across the country.