My Sunday Washington Post Business Section column is out. This morning, we look at the annual forecasting foolishness so prevalent in the media.
By now, you know the drill: A bunch of analysts make their annual predictions, and of course, they are utterly useless. Here’s an excerpt from the column:
“It’s that time of year again when the mystics peer deep into their tea leaves, entrails and crystal balls to divine what’s ahead.
Which means it’s also time for my annual reminder: These folks cannot tell the future. Ignore them.
Most forecasters are barely familiar with what happened in the past. Based on what they say and write, it is apparent they often do not understand what is occurring here and now. Why would anyone imagine that they have the slightest clue about the future?
This is not my opinion, but a simple statistical fact: The data overwhelmingly show that the skill set of the predictive pundits is no better than a coin toss. The odd person gets these forecasts about the economy and stock markets right each year, but the lack of any sort of consistent winners and losers means that, mathematically, it is a random outcome.”
I speak with numerous experts about the subject, including:
-James O’Shaughnessy (author of the classic “What Works on Wall Street,” and CIO of O’Shaughnessy Asset Management
-Morgan Housel, a columnist for the Motley Fool
-Michael Johnston (Poseidon Financial. author of “A Visual History of Market Crash Predictions” and “The Not-So-Surprising Truth About Gold Bugs.”)
-Laszlo Birinyi (researcher and market historian)
-David Rosenberg (chief economist and strategist at Gluskin Sheff)
They name names and dates and forecasts; hilarity ensues . . .
Would you let a mystic manage your investment portfolio?
Washington Post, November 29, 2015