An investment manager friend told me that no matter what he does with his clients money , he is always wrong. In our down economy , if he decides to pull 50 percent out of the market and the market does drop: Well he didn`t pull enough out. If it rises , he took out too much. "I wish I had a crystal ball" , wails my friend.
I started thinking about this and decided that he was wrong. A crystal ball would be very bad for the investors !
Sure , it might start off all grand and wonderful , but eventually exuberance will outweigh common sense. (Can you say irrational exuberance) The proprietor of said ball will inevitably get greedy. He may start pulling family and friends in , or selling off safe assets ,or borrowing to invest in the crystal ball infused scheme.
The market will rise in the areas of all the good bets , investors without a ball will inevitably notice how well some stocks are doing and continue to drive up the price creating a bubble. This bubble will burst. Ball holders may anticipate this and pull out in time , but at what expense to the market and the economy and other investors. Eventually that crystal ball will only tell you not to invest in the market that the ball ironically destroyed. Thats NOT a boon for investors.
And how long do you think this crystal ball would remain secret. Come on , Iran can`t even keep nuclear secrets and they are VERY secretive. Iraq couldn`t keep its secrets about hidden weapons of massive destruction......oh wait ...bad example. Obama couldn`t keep the secret that he thinks Kenye West is a jackass despite his abuse of official power attempting to censor the press. "Come on guys , cut the president some slack and don`t print that , I have a lot on my plate today"
So we know that eventually the crystal ball will no longer be secret. The powerful will find a way to benefit at the expense of everyone else , outrageous bonuses will be handed out right after the layoff announcements. Unemployment, High gas prices , queues for bread etc ; will ensue.
Then the chinese will figure out how to reverse engineer it and sell it on the black market. It will be about this time that the burst bubble will become a supernova sucking everything in causing chaos and anarchy and religious fanaticism. The apocalypse is here.
Stupid idea , that crystal ball.