Predict This!

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).

Continues here

Category: Investing, Quantitative, Really, really bad calls

10 Thursday AM Reads

I was busy yesterday afternoon, did anything interesting happen while I was out? • Stocks Explode Higher on Fears of Renewed Economic Weakness (TRB) but see Fat Lady Is About to Sing, According to the Charts (Barron’s) • Why Companies Break Up: Hint: It’s not because they’re well managed (Medium) • What the Dollar’s Rise Tells…Read More

Category: Financial Press

Map of Top 20 Billionaire Cities

click for full report Source: Wealth-X and UBS Billionaire Census 2014

Category: Digital Media, Wages & Income

Has China’s Economy Become More “Standard”?

Has China’s Economy Become More “Standard”? John G. Fernald, Eric Hsu, and Mark M. Spiegel FRBSF Economic Letter 2014-30 October 6, 2014       Financial liberalization in China has broad implications, including changing how its central bank’s monetary policy affects the nation’s economy. An estimate of Chinese economic activity and inflation based on a…Read More

Category: Think Tank

John Oliver on Civil Forfeiture (HBO)

Did you know police can just take your stuff if they suspect it’s involved in a crime? They can! It’s a shady process called “civil asset forfeiture,” and it would make for a weird episode of Law and Order.

Category: Legal, Really, really bad calls, Television, Video

10 Wednesday PM Reads

My afternoon train reads: • The Empire of Edge: How a doctor, a trader, and the billionaire Steven A. Cohen got entangled in a vast financial scandal. (New Yorker) • Yamada: The War In The Gold & Silver Markets (King World News) see also Why Warren Buffett hates gold (USA Today) • 8 tips to maximize your 401(k)…Read More

Category: Financial Press

How Is Your Brain Interfering With Your Investing?

I am the guest speaker tonight at AAII’s NYC meeting in midtown. The subject: Why your brain is the source of nearly all of your investing errors, and what you can do about it. (Details here).   Click for more details   Should be fun!

Category: Cognitive Foibles, Investing, Psychology

U.S.-listed ETP Flows

Source: Fidelity

Category: ETFs, Markets

Is the Bull Market Turning Bear?

Yesterday’s sell off has the bulls worried. Major U.S. indexes fell about 1.5 percent. Ten of the past 12 trading sessions saw swings of 100 points or more in the Dow Jones Industrial Average. The list of worries ranges from the strengthening dollar’s harm to U.S. earnings, the end of quantitative easing, Europe’s weakening economy…Read More

Category: Cycles, Investing, Trading

10 Wednesday AM Reads

My morning train reads: • The world’s greatest stock picker? Bet you sold Apple and Google a long time ago. (Washington Post) • Tom Dorsey: “I don’t make judgment calls, ever. We’re purely rules-based.” (WSJ) see also Pisani: Why are sell-side stock market analysts so wrong? (CNBC) • Small Caps Are In The Danger Zone…Read More

Category: Financial Press