Thinking About Prices in the Distant Future

A couple of words about how Friday’s column, What Investors Should Ask Themselves, came about.

When I initially read Tyler’s challenge — A genie appears and offers to send you the price of one but only one asset 20 years from now to inform your investment decisions (a stock, currency pair, commodity, equity index, etc.). What do you want to know? — my immediate initial reaction was “Price of the world’s best performing stock over that period (as well as its name).” But the challenge is you get price alone — not a specific stock name AND its price (or asset class &price).

How many stories have you read about deals with the devil — people sell their souls, only to find the devil has tricked them in some way. That started me thinking about the possible permutations that might occur; the game with genie might not be a deal with the devil, but its potentially similar.

In what ways? Perhaps the price you get is accurate, but the way it gets there is problematic. Maybe it does nothing for 19 years, providing no income, no opportunity to cash out, no way to enjoy the wealth. Maybe it hits that price in year 1, plummets, rallies, drops, etc. Perhaps the knowledge of an asset’s price 20 years hence simply drive many investors mad. Or, perhaps you might drop dead just before it starts its meteoric rise.

The more I thought about it, the more the question itself bothered me.

A reminder I set a year ago about someone’s forecast — Crude Oil was about to recover from its terrible collapse — popped up. That prediction of Oil’s recovery — just before it got cut in half again — was my answer to Tyler’s challenge. If our forecasting a mere year ahead is that goddamned awful, how could anyone manage “magic” knowledge about price 20 years out?

Hence, the realization that the proper answer was not the correct response to the question, but rather, to challenge the underlying premise itself.


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