Really good article froggie... thx... just an exerpt Whether watching the stock market or the economy, those who are paid to figure out what will happen in the future and inform investors have repeatedly shown they’re unable to get it right. It’s not just that it’s impossible to consistently and accurately predict the future. Financial experts are saddled with conflicts of interest and psychological baggage that can warp their research. The sooner investors realize this, the better off they’ll be.
Frauds and financial meltdowns are, thankfully, quite rare. On a day-to-day basis, though, analysts are still often way off the mark with their research. Last year, the consulting firm McKinsey looked at a quarter-century of analysts’ earnings forecasts and compared them to the actual earnings companies eventually reported. The focus of the study was on sell-side analysts, meaning those employed by brokerage firms that help bring new companies to the stock market. McKinsey found that, year in, year out, sell-side analysts were “typically over-optimistic, slow to revise their forecasts to reflect new economic conditions, and prone to making increasingly inaccurate forecasts when economic growth declined.”