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Who cares what others think, especially about BP?

Apart from football there can be few industries that generate more speculative comment than the world of finance. It is easy to see why so many people want others to hear their views. What is less obvious is why there is such a huge demand for it.

Members of the financial chatterati and commentariat will obviously claim that they are informing clients and readers about the latest products and impacts of tax and regulatory changes. That is certainly true and they provide a great service for investors short of time. However, you don't have to go far into the financial press or message boards before you find someone pontificating on the virtues of a certain stock, sector, currency or asset class. Less often there will be some analysis of why such financial assets are overvalued.

This fare keeps many magazines, websites, trade publications and the financial pages of the newspapers well supplied with copy on a daily, weekly and monthly basis. Some of it is there of course to fill in what would otherwise be blank spaces between the adverts. Nevertheless, it is clear that there is a real demand for a lot of punditry, advice, speculation and musing about finance. While some of this commentary is provided by journalists with no axe to grind much of it is also provided by money managers who definitely have an agenda. One that says: "Trust me, I sound as if I know what I am talking about." Since only one third of those fund managers will beat the market in any one year the odds on getting good advice from such articles are against you. In truth these comments do provide a service to investors and advisers alike, but perhaps not in quite the way intended. In a complex and confusing world they provide reassurance that someone out there does actually know what is going on. So many investors and advisers are now so totally unsure of what is happening, and lacking in confidence, that they seize on any words of wisdom from those in elevated positions. The variety of advice is such that almost any view can be found to have support if you look hard enough.

Those that are not reassured by the written word can get a much higher degree of confidence by hearing it direct from a guru at a conference. Just reading that someone is bullish on, say, China carries nothing like the weight of actually listening to those words being spoken with total conviction. What is more, being in a large group all with a similar frame of mind is a fantastic mechanism for reinforcing mainstream views. Emboldened with the knowledge that everyone agrees with him a delegate can return home with even stronger faith that he is right.

To an extent what matters more these days is the degree of conviction a money manager has rather than the veracity of his opinion. The future never turns out quite as predicted so it is hard to pin managers down and ask why such and such didn't happen. So many events erupt that change outcomes that there is never a shortage of excuses. That doesn't matter. The disciples still clamour to ask the guru what will happen next, even if the guru got it wrong last time. Getting it wrong passionately seems to carry more weight than being cautiously correct.

In such an environment it is no surprise that the man who professes to have no idea what the future holds is held in low regard. Surely a fund manager is paid to second guess the future? Unfortunately history shows that the track record of fund managers guessing the future is about the same as Mystic Meg. In fact they are worse. At least Mystic Meg's forecasts have a 50% chance of being proven correct while we know that two thirds of active funds fail to beat the index each year, and even more over longer periods.

Nonetheless, soothsayers, shamans, witch doctors and fund managers fill the same basic need to provide guidance for the future. Their prognostications on marriage prospects, the recovery of the Retail Sector or the year end level of the FTSE provide hope and guidance for consumers and intermediaries alike, however accurate or inaccurate.

The recent crisis at BP is a classic example. No one saw it coming and nobody knows how it will end. But that hasn't stopped pages and pages of newspaper print and endless megabytes in the blogosphere being devoted to it.

For the rest of us accepting that no one actually knows what is around the corner can be a deeply destabilising moment. Finally accepting that the future is unknown is unsettling, but once done is truly liberating. Now you can select investments purely on their cost and valuation. No longer do you have to weigh up the veracity of one set of forecasts against the other. You don't have to read the trade press or go to conferences to hear what others think. Suddenly, you have an enormous amount of time to spend on growing your business or enjoying life. Having the confidence to concentrate on what is known is far more rewarding than trying to guess the unguessable.

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