Analysts Don't Know Squat 27 comments
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I don't usually watch television, but I happened to catch Wednesday night's NBR. Analyst Hilary Kramer scared me out of my wits when she said she expected the market to drop 25%:
I believe in the first six months, everyone should be very careful, all investors. We could see the Dow dip to 7500. S&P could have another 25 percent downside...But don't just rush in or if you have some concern in the market, sell, hold out, wait for the real bottom to come...I think that gold could reach $1400 during 2009.
I was absolutely frightened until I saw the following transcript, also from NBR. Ms. Kramer says,
I believe we have seen the bottom and we are going to now see a bull come back into Wall Street. We have formed a bottom and the reason we know that is that we finally had real buyers come in today. But we know it even more so because of what I saw this morning and yesterday, which is real fear. Fear took over and it over powered greed. Greed for so long was fueling the market, including as it was going down people buying into it.
The date? January 23, 2008. At that time, the DJIA was 12,270--now it's 8,468. The S&P was 1338--now it's 865.
The lesson? Analysts don't know squat. Trust your own instincts. Or at least listen to people who've been right before, like Barry Ritholtz.
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This article has 27 comments:
I think fortune tellers use the same technique and psychologists call it reinforcing pre-set biases.
Whatever makes the trade right!
The crucial thing about is, that verybody will listen to them, because they are the experts. I know one or two, and they have confirmed that they do not have a clue, but just sell what gives the bank and them the highest provision.
And what even frightens me the worst, is that everybody is now listening to these experts, waiting for them to tell us what is going to happen, the same ones that told us that everything rises continuesly.
It is of general knowledge, but people fall for it over and over and it can not be said often enaugh.
I'm glad that Christmas only comes once a year, because while waiting for my wife and children to return from their Christmas walk, I decided to glance at my computer.
On Dec 26 08:00 AM Ferdinand E. Banks wrote:
> Everything is relative in this old world, isn't it Matthew. Analysts
> may not know "squat", as you put it, but they know more than the
> people who buy their services or rely on them. In these circumstances
> I don't see any reason to complain. There is no point in being sensitive:
> for instance, who knows more about energy economics than my good
> self, but everywhere I turn some joker wants to tell me that I'm
> wrong about this-or-that. They don't last the course, but sometimes
> it's annoying.
EXACTLY!
On Dec 26 08:15 AM Dave Wrixon wrote:
> What kills me is those giving advice on how to get out of a crisis
> they couldn't even see coming. How dishonest is that!
Now, you have "experts" out there that clearly what will happen in the economy two to three years from now based on a clear understanding of past Wall-Street and governmental spending spending trends. BUT because these people don't bury their heads in the sand like many, if not most, financial experts, investors call them "doomsday prophets."
Three "doomsday prophets" that predicted the current economic recession we are in through the mortgage/credit meltdown are in great demand for their financial foresight, or should I say, financial common-sense. Nouriel Roubini, Peter Schiff, Peter Schilling, and McAlvaney are in the "limelight" because of their warning from two years ago that our economy would be headed for a major housing/credit crisis. Two years ago they were ridiculed. Now, like the commercial on EF Hutton....When Roubini, Schiff, Schilling and McAlvaney speak......EVERYBODY LISTENS or SHOULD listen considering that their predictions and the accuracy of their predictions have been 100%. Just like the prophets of the "Old Testament", nobody wants to hear "bad news". They just want to hear WHAT they want to hear. And the truth won't "go away" just because "Wall Street" want to keep up their "illusion" of continuing "good times and easy credit." Peter Schiff has recently stated that all of his predictions have not materialized as yet. But based on the reckless financial policies of our government and Wall Street, rest assured, they will. All of the above individuals comments can be seen on You Tube, and to a lesser degree, on Yahoo financial news.
Arthur is a good man and I hope he writes about his time in the Clinton Administration. I know he is contrite about being quiet while Robert Rubin set back the investment community for decades and made a fortune doing it.
Rubin and Goldman Sachs make Madoff look like a piker.
Does it occur to them that there is no sense in re-inviting "experts" with a history of very bad recommendations?
Foreclosures will remain plentiful well into 2013. If the US automakers hit an iceberg bigger than the 2008 one, we could see foreclosures double, even triple.
I'm not betting a penny of MY money on a 2009 turnaround.
Since oil production rates are declinning at 9%/year I suspect that if and when "demand destruction" subsides the price of oil will skyrocket. This will stop any new rallies in their tracks. I'm sure that Kramer will be watching for this event and will make more commissions by recommending that her clients sell short.
If you've been in this game long enough, you notice that most financial and economic prognosticators work with the assumption that investors have very short memories or can, at most, remember only one major prediction.
Therefore, one type of prognosticator makes make many, many predictions so that, because of the law of averages, some of the predictions will necessarily turn out to be correct. He/she relies on the assumption that most people will forget the false predictions.
It's too bad that most of these financial "experts" are not exposed as the shameless losers that they are, but people seem to need experts and, apparently, refuse to listen to their critics anyway.
Another trick some "experts" use is to make ONE big prediction every year.
After the first year, by the laws of probability alone, there is a fifty-fifty chance he/she will be right. The next year, there is a 25% chance he/she will be right both years and so on.
3% of these financial gurus will be right (by the laws of probability alone) for five years running and gather a huge crowd of impressed investors around them.
But, by the law of the mean, their one big prediction for year 6 will once again have only a probability of 50% of being right.
If you add in eclectic financial experts who use both both methods, you just about cover the entire field of financial and economic prognostication.
The above is meant to be slightly cynical-humorous, (I'm a Groucho Marxist) but it contains a very large grain of truth.
Nevertheless, knowledge, intelligence and honesty in the face economic and financial facts still confer an advantage. We can't afford to go forth into the battle without them.
seekingalpha.com/artic...
i have thought about long and hard. what are the environments my decisions are formed in? thats right, most of them are influenced by the so called experts.. Does the following make any sense to anybody in today's world:
Time:Is There Really a Credit Crunch?
www.time.com/time/prin...
when they panned in front, they were below the shot) interview, he's a flat-out LIAR. Sorry, that's imo.
Never make predictions, especially about the future.
Casey Stengel
When an "analyst" speaks, most often their comments are rooted in what might be termed "trailing indicator" stuff that, while it might be interesting, has very little portent for the market and, likely, far far less for any individual stocks.
Perhaps staying out of the market for at least another 6-9 months might be good advise from real advisors. And for all those advisors that tell us the "Market" is 6 months ahead of the curve...like it is an all knowing entity that knows what is coming"....how do you explain what the "market was saying July 08, for Jan1 09????
I could just as easily be an advisor based on what I have been reading from others. Here is my 2009 prediction from a lay person that has no contacts/ expert background/but has good instincts and reads well.
I predicted oil would drop into the $20+ range 2 months ago. (almost there)
I predicted gold would drop in 09 early after rising quickly 08 and then really jump as the US$tanks (We will see if I am right)
I predict that Jan 09 will be an unexpected month of surprises worldwide. (stockmarket and further)
I predict that at the end of 2009, you would have to be a great stock picker to have made money.
I predict that the best advise for those that have money, is to pay down your mtg and own your property, and enjoy today as if it was the 1920's.
I predict that cash will be king for the first part of 2009.
I predict that there are dealings behind closed doors that we dont know about that are going to catch all of us by surprise.(That is all I am going to say about that) Remember this Aug 2009...
Blonde Molly