Think you've had a rough month in the market? Be glad you're not Lloyd C. Blankfein, chairman and chief executive officer of Goldman Sachs Group Inc. (NYSE: GS), who lost about $52 million of his personal wealth this month, according to a review of regulatory filings by Bloomberg News.
So here's the logical question: If they're so smart, how did they lose so much? And the answer is simple. No one can really predict the market with anything close to 100% accuracy.
Of course, there's always luck and timing, two things that can lead to immeasurable profits. But there's also the unpredictability of human nature and the hard-to-measure effects of fear, panic, greed, and the simple desire to gather enough cash to survive.
All that said, it's entertaining to read market forecasts. But it's even more entertaining to re-read old market forecasts, just to see how far off base some of the predictions really were.
Need a laugh? Here are six things that central bankers, market analysts, economists, and other people we expect to know better probably wish they hadn't said. It proves that no one has a crystal ball, and that you might as well back off the ledge. With all the pundits predicting doomsday, things just might turn out all right after all.
"Gold -- now priced at more than $1,365 an ounce -- is trading in La-La Land. And if you're piling into it now, you're taking a very poor risk." -- Alexander Green, Investment U's chief investment strategist, January 7, 2011.
"The economic recovery that began in the middle of 2009 appears to have strengthened in the past few months... We have seen increased evidence that a self-sustaining recovery in consumer and business spending may be taking hold." -- Ben S. Bernanke, Federal Reserve chairman, speaking before the House Committee on the Budget, February 9, 2011.
"Short-term interest rates are likely to rise in 2011 from their abnormally low level of close to 0%. Yields on long-term bonds too may rise, resulting in a headwind for Treasury bond investments... Unemployment insurance claims are trending lower, auguring better times for the employment market." -- Sam Subramanian, managing principal and chief investment officer, AlphaProfit Investments LLC, January 13, 2011.
"Four potential scenarios for 2011, based upon information available to our research team at this point in time, with an internal probability assigned to each. Scenario 1: The Recovery Gains Traction. Probability Assigned: 55%... Scenario 4: Bear Market Surprise/Double-Dip Recession. Probability Assigned: 5%." -- Kevin Mahn, president and CIO, Hennion & Walsh Asset Management, February 16, 2011.
"The recovery that began in 2009 and continued in 2010 is projected to gain momentum in 2011 and to strengthen further in 2012." -- Obama administration, February 14, 2011.
"I will not rest until anybody who's looking for a job can find one." -- President Obama, in a speech to workers at a GM plant in Lordstown, Ohio, September 15, 2009, 16 months before issuing the above referenced economic forecast (which warns unemployment will average 9.3% this year) and 23 months before he plans to leave Washington to vacation with his family in Martha's Vineyard. Again.
As an investor, it all comes down to this: Who do you trust to give you investment guidance you can count on and profit from? Do you trust reporters and journalists that are telling you what happened yesterday? Do you trust stock brokers that make their money when you buy stocks they recommend? Investment analysis today needs to unbiased and independent. You should only pay for the investment analysis you use and you shouldn’t buy that analysis from someone who makes money off your trades.
Your two-category definition is right on the spot. People need to check those "experts" out, before start to follow them. Of course the average investors are at a disadvantaged position. They either don't have enough knowledge, or no time, or neither of them. So, it's really tough.
You are right long term advice is more appropriate, but too long is too dangerous too because you never know what lies ahead. So if we are in profit its better to sell half the holdings and invest it in other stock and thus diversifty your holdings.
He said this like he was serious, but didn't bother to offer anything that had actually changed in the last day.
@PredictableChaos, I agree with you most of the analysts make wild guesses withyou bothering to offer any reason. Lets accept it nobody can beat the market. I feel we are just getting "Fooled by randomness". The best bet we can make is bet long term say 5-10 years and then just pray that the investment decision was right.
These market predictions are humorous in hind-sight, but you don't even have to wait to get a good laugh on the daily stock market analysis.
Thursday, after the market had moved up nicely following Wednesday's decline; I heard a radio analyst explain it by saying "we're more confident about the European debt situation today than we were yesterday".
He said this like he was serious, but didn't bother to offer anything that had actually changed in the last day. Some of the nonsense that is offered as explanation for why the market moved one way or the other, just makes me laugh.
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