Posts filed under “Really, really bad calls”
Over the years, I have discussed how little I care for predictions (see “The Folly of Forecasts“). We have chatted about how poor Wall Street is at making forecasts, wondered why they keep at it and revealed the secret to making better predictions.
But the bottom line is that you humans are terrible at forecasting the future. You are bad at predicting the economy and terrible at forecasting markets. The data shows you can’t even predict your own behavior.
Which leads me to today’s delightful quote, from Jason Shapiro of Perbak Futures Management. Shapiro observes just how wrong our forecasts about the future can get:
“Looking at the markets here I was laughing this week thinking about what the reaction to anyone back in 2009 who said that in five years the following would be true:
Equities basically on all-time highs, interest rates incredibly low, commodities at multiyear lows, and the U.S. dollar as strong as could be.
These predictions would have gotten you thrown out of the room.”
Truer words were never spoken. I recall referring to this chart from Morgan Stanley Europe at an event I was speaking at in the summer of 2009. I noted that following a 50 percent drop in the stock market, the median bear-market-rebound rally was a 70 percent bounce. The room exploded in laughter, as everyone knew that was never going to happen. Everyone knew the bounce off of the lows was a thing of the past. The forecasts were for Dow 5,000 (See Kostin, Gross and Nenner), Dow 3,000, (Denninger and Dent) and even Dow 1,000 (Prechter).
One of the things I like to do in all of my musings is to find some thing or person who is wrong about an investing-related subject, then trying to figure out where they went awry. On occasion, small pearls of wisdom can be derived from this analytical process, as in this discussion on narrative….Read More
The human capacity for making bad decisions about technology seems to be limitless. In many ways, this parallels bad approaches to trading and investing: Lots of unfounded rumors, emotional decision-making, poor risk-reward analysis, an inability to perform simple math. The spasms of technology silliness surrounding the iPhone 6 are just the latest in a never-ending…Read More
Another classic from Jason Zweig’s archives: On this day in 1988: Buy Stocks? No Way! hollers a headline in Time magazine. Wild horses couldnt’ drag me back into stocks. Rather than gamble in this market, I might as well go to Las Vegas, retail investor Curtis Beusman tells Time. Eleven months after last years…Read More
Cassandra Does Tokyo is a former hedge fund manager and ex NY Trader, who is now living abroad. This was originally published on September 23, 2014 ~~~ When people prattle-on about tax, it is mostly made from ground-level, with a focus on tax rates. When my most rabid libertarian friends weigh in on the subject,…Read More
Today is an auspicious anniversary, though it’s one I suspect many people may not recall. On Sept. 23, 1998, former Federal Reserve Chairman Alan Greenspan and William McDonough, then president of the Federal Reserve Bank of New York, managed to orchestrate the rescue of the hedge fund Long Term Capital Management. It was a strange…Read More
Last week, I came across the following headline: “As music sales fall, sax player Kenny G turns to stockpicking.” My immediate reaction: Uh oh. The last thing any bull market needs is for celebrities to be featured in the financial press. As soon as that starts, it means the bull market must be near a…Read More
For a long time, the fund managers at Yale’s endowment were the industry’s gold standard. Inevitably, as in so many things Ivy, this was noticed by rival Harvard. The so-called Yale Model, developed by David Swensen and his colleague Dean Takahashi, was rich with alternative investments, private equity, commodities and real estate and other items…Read More