Irving Fisher was a brilliant economist. He received his PhD from the august Yale University in Economics, with a thesis titled Mathematical Investigations in the Theory of Value and Prices. Fisher served in both economic and mathematical societies as a prominent figure, and was regarded as one of the foremost experts in economics on the planet. Unfortunately, he is not primarily remembered for his contributions to multiple fields, his service to academia, nor his campaigning in the interest of public health. Dr. Fisher is most commonly referenced for making one of the most ill-timed predictions in financial history (as I’m going to do here).
In September of 1929, the Dow Jones Industrial Average was soaring at all-time highs around 5,000, which was an increase of over 500% from the previous decade. The markets were booming, and people were pouring money into investments with nothing more than a blind belief that markets would continue to rise without interruption. In this frantically optimistic investing climate, Dr. Fisher famously uttered the following phrase in the New York Times:
“[stock prices have reached] what looks like a permanently high plateau,”
This quote was from an article in which Fisher described continued bullish optimism for the markets, and was a clear signal from a leading expert that the markets were going to continue their meteoric rise.
A few weeks later, the markets took a dive, and the United States entered a 12-year economic nightmare. Fisher’s professional reputation and his personal wealth were critically damaged, and his work was widely ignored until after his death.
In the almost century since Dr. Fisher’s prediction, he’s actually been vindicated. In January of 2018, the Dow Jones Industrial Average hit 25,000 for the first time, which was an increase of approximately 500% from when Dr. Fisher made his prediction. It only took 80 years to see it come to fruition.
Where am I going with this?
Over the past 90 years, we’ve seen countless financial and economic experts deliver their predictions on the trajectories of national economies, stocks, bonds, indices, and everything else under the sun. Unsurprisingly, the vast majority of these predictions are wrong. Most programs, like the inexplicably popular Mad Money with Jim Cramer, carry a disclaimer that essentially states everything they say is worthless.
Rather than listening to famous ‘experts’ of all stripes and colors, you would be far better served by a fiduciary financial planner who is actually responsible for their advice. If I make a recommendation to a client, it is my responsibility to justify that decision is in the best interest of the client, and aligns with their goals. If Jim Cramer tells you that a specific stock needs to be sold immediately and it doubles in price over the next six months, he can carry on hosting a primetime financial show that has been running for 14 years.
The bottom line is that we live in an age where there is more information available to you than you could ever take in. Rather than staking your financial future on the advice of experts, celebrities, and anyone else who can find their way in front of an audience, you should trust the people who are paid to work for you.
The famous experts don’t work for you. We do.Author’s Note: I don’t have any personal issue with Mr. Cramer. He’s just an easy example to use of a famous and popular host that is, unfortunately, full of bad advice.