Why I Hate Market Forecasts Lots of folks find comfort in looking at the market forecasts of some analysts.
While it may be comforting for those who don't like uncertainty, forecasts of the future are a waste of time.
Not only that, but they lead investors and traders to think some analysts can forecast the future, at least in markets.
And often they will trade based on those forecasts.
The unfortunate truth is that the future is unknown.
Those analysts who claim to be able to forecast the future usually have an agenda.
Like they want you to subscribe to their information services.
One thing you should never ever do is believe what forecasters say about their own track records.
Aside from just plain lying about their track records, they will carefully pick some of their forecasts from the past that worked out.
Meanwhile, they will avoid mentioning their forecasts that were terribly wrong.
Studies have shown that money managers who have hot streaks for several years tend to have cold streaks for several years.
The only track records of market forecasters that I trust are those done by independent monitors such as Mark Hulbert.
He subscribes to hundreds of letters and actually keeps a data base of their performances.
So he presents their actual performance, instead of the BS they print about their track records.
I offer as a case in point the the record of Bob Prechter.
He is not special, but he is representative of the deception used by market forecasters who have a service to sell.
I subscribed to Mr Prechter's service in the early 1980s and even practiced Elliot Wave analysis for a couple of years.
He had a hot hand in the early 80s and was bright enough to recognize that the US stock market was undervalued and due for a multi-year rally.
He thought the top was in after the 1987 crash and has been mostly wrong in his forecasts since then.
https://www.erictyson.com/articles/20090616#.VDE4SlcXMa8
My point is not to beat up on him, but you will find him still touting his forecasting ability even with his dismal performance.
Why is this possible?
Human beings and especially investors don't like uncertainty.
Uncertainty can be stressful and it is reassuring to be able to follow someone who seems to be able to predict the future.
Unfortunately it is delusional to believe in this notion.
So what is better than following the forecasts of your favorite analyst?
I would say learning how to evaluate value in the stocks or commodities that you like.
There are indicators that historically have pointed to overvaluation or undervaluation in stocks.
There are indicators that point to whether a stock or commodity is over bought or oversold or has extreme bullish or bearish sentiment.
IMO, these are the factors that we should pay attention to.
Technical analysis is also useful, but is not a holy grail.
It is easy to go wrong with TA and it is more of an art form than a science.
It can supplement fundamental analysis.
Also get used to the fact that all trading and investing is based on probability, not certainty.
Learn how to manage money and control risk.
Learn how to protect profits you already have, when emotionally you may be greedy for more.
Learn how to limit losses and not hope that the market will eventually go your way.
If you cannot recognize when you are wrong in your market opinion and limit the damage occurring from that wrong opinion, you are in deep trouble.
goldguy