Understanding That "The Economy is a Living Thing"

When predicting economic trends or the direction of the stock market, the most common approach is to refer to the abundant economic and stock indicators available around us.

Investors, in particular, delve into various past and present data, examining it from all angles—front, side, and even upside down—to derive their own forecasts or conclusions.

However, almost all these predictions turn out to be inaccurate. Not only investors, but also diligent scholars, economic experts, and seasoned researchers, despite preparing vast amounts of data and utilizing high-performance computers, are unable to accurately foresee any economic phenomena.

Somewhere along the line, the notion that "not being wrong is good enough, a perfect score" has become widely accepted.

Gazing at a Donut: "Bullish" vs. "Bearish" Forecasts

Those who make their own predictions or draw conclusions can be broadly categorized into "bullish factions" and "bearish factions," representing optimistic and pessimistic outlooks, respectively.

The difference between the bullish and bearish factions is quite humorous. In the West, there's a saying about economic and stock market forecasts:

"The bulls look at the donut itself, while the bears stare at the hole."

Looking intently at the donut before them, the bulls focus solely on the size of the donut's substance, completely overlooking the hole. Conversely, the bears fixate only on the hole, growing increasingly despondent.

This is a satire on the one-sided perspective where, regardless of the donut's overall size, if the hole is proportionally large, it's still just a regular donut. The bulls are distracted by the size of the donut's body, while the bears are preoccupied only with the hole.

Many people present themselves as wise by using these two perspectives—bullish and bearish—to derive lessons. They might say something like, "By developing the habit of averaging the bullish and bearish views, you can make accurate predictions and succeed in your investments."

However, it hardly needs to be explained that the economy and stock investments do not operate in such a straightforward manner. We have all experienced firsthand the impossibility of deciphering the daily fluctuations of stock prices and foreign exchange rates.

It is crucial to thoroughly understand these fundamental aspects and to engage with the challenge with a clear awareness of potential gains and losses.