Bond Market Outlook for 2013, Part 1
First, as I've done every year since joining TheStreet, I will begin by explaining my philosophy toward making predictions. When you are a bond guy, invariably many of your decisions are based on macroeconomic analysis of interest rates, inflation, credit spreads, etc. The trouble is that actually making accurate forecasts in macro is exceptionally difficult. On top of that, as an investor, if I make a big macro forecast and orient my entire portfolio toward that forecast and get it wrong, the whole portfolio performs poorly.
My solution is to forget about making singular predictions and instead think in terms of possibilities and probabilities. In practice, this usually means that I come up with a base-case scenario and then some alternative possibilities. I then position portfolios to succeed very well in my base scenario and reasonably well in the less likely scenarios. The downside of this methodology is that I never get to be the hero who makes a big call and gets it perfectly right. On the other hand, I believe I ultimately will make more money for my clients....660 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.
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