As an investor, you are barraged with risk - economic risks,
personal biases, companies overstating results, and rapidly
shifting trends are just a small sampling of obstacles we all face.
I believe another risk has recently emerged; coupled with
technology and media advances, it is a dangerous investing risk you
need to have on your radar. What is this risk you ask? Inflation?
The dollar? Japanese Central Bank intervention? The next Cyprus?
Those may all be risks, but this subtlety emerging risk is an
expanding bubble in certainty. Certainty? Certainly.
As trends become more pronounced, and especially as they extend in
duration, certainty have levitated to amazing levels. It wasn't
enough to merely caution investors about bond market risks in
December of 2012 - statements then warning debt investors expressed
a certainty that bonds were indeed a bubble and that interest rates
) closing in on $700 last fall elicited analysts calling for even
more gains, and cavalier calls for certain $1,000+ per share price
targets to be quickly met. I could go on, but if you follow the
markets closely, you likely see increasing examples of this every
day (saying nothing regarding an explosion in hindsight certainty).
Certainty has recently swirled around the concept that investors
have no alternative but to be invested in stocks, and that every
dip should be bought. It's also reared its head in commentators
pronouncing the definite end to the gold market's bull run
(interestingly, replacing a certainty that gold prices had nowhere
to go but up). Investment comments and analysis, which normally has
been represented as opinions, thoughts, or probable outcomes, has
somehow experienced a metamorphosis from what is
to occur into what
occur. Certainty is the new consensus.
A number of reasons likely explain this recent phenomenon. First of
all, there has been an unprecedented explosion in content and
providers of content. This content expansion has subsequently led
to an increase in sensationalistic content as merely expressing
possibilities has become passÃ© and an obstacle to viewership gains
or page views. Content growth, coupled with technology advances and
media accessibility has also given investors an Ã la carte
ability to pick and choose mediums, especially opinion-confirming
It appears the more we are faced with uncertainty, the more we are
wired to desire binary answers and absolutes, and to gain comfort
from quantitative answers at times when our environment is far from
certain. As investors stare at the supermarket shelves of
investment commentary, we seem to be demanding certainty and
immediate answers. Hence, financial television with 30-second
countdown clocks quickly deciphering a multi-national corporation's
prospects into a simple "buy" or "sell"!
This can be very dangerous to you as an investor in many ways - it
leads to overconfidence in what outcomes are likely, it can keep
you from assessing current risks while wearing those blinders of
certainty, and it can lead to longer-term frustrations as results
that were certain to occur end up drastically different than
What to do? Embrace uncertainty. Remember that investing can be an
incredibly difficult process at times. Learn from investors who
have been battle-tested, try to gather information from those who
respect how quickly markets can humble investors, and try to
maintain looks over your shoulder at what might go wrong, instead
of settling for assurances of what is certain to happen.
We live in a very uncertain time. It was Ben Franklin who wrote,
"but in the world nothing can be said to be certain except death
and taxes." That is commentary that has lasted 224 years.
This article by Ross Heart was originally published on