Sunday Funnies: Predicting Nothing

There are even contests enticing readers to make their best guesses about where the DJIA, S&P 500 and NASDAQ will end the year; which CEOs will get fired; where will interest rates be; the price of gold, crude and more. It can be great fun to participate if you're so inclined.

Just remember one thing -- it's all just noise! It will not help you as an investor.

If the economy is great or it stinks, you should still be saving your money, keep your borrowing to a minimum and search for value -- frugal is better than spendthrift no matter what happens this year.

When and if you invest in individual stocks, strong management is better than weak; a lower P/E, P/CF, P/S, P/B and debt is better than higher -- higher ROE, ROA, ROIC, growth and profit margins are better lower. This does not change with the wind.

Consider your most dependable close friends, they do not change the quality of their character in good times and bad -- they are there for you. The same is true with long-term success with your investments. Choose them like you would your friends, stick to basics and ignore all the prognosticators.

Some of my disdain comes from "my pal Warren" of Berkshire Hathaway (BRK.B). Buffett makes no predictions and shuns quarterly and annual corporate guidance (guessing) as market folly. For those that would like to actually learn something about Warren Buffett and his investment philosophy and process I highly recommend How to Pick Stocks Like Warren Buffett by Timothy Vick. It is a quick read and full of helpful insights that can be easily applied.

A deeper and more detailed analysis of the investment world can be found in A Random Walk Down Wall Street by Burton G. Malkie. It explores a broad range of investment ideas, opportunities and critiques that are sure to sharpen ones investing acumen.

For a more recent book that goes beyond the investment world to shed even greater light on the inherent problems or uselessness of predictions, read The Black Swan by Nassim Nicholas Taleb. He offers his personal and studied insight as to why the things that will really affect us the most are outliers, unpredictable events, that can influence social change and markets rapidly without warning.

These three books are only a beginning, but they all have very valuable information that is instructive and thoughtful -- and will help you stay grounded as you make your way through the investment jungle in 2010 and beyond.

Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture and planning firm. He writes the columns Chasing Value and Serious Money.