We all love making predictions. Maybe it’s because they are tiny bets. Think about it for a second. You are watching Survivor and you try to predict the winner. You watch The Bachelor and try to predict the winner. Virtually any show you will try and predict what will happen. We also try and pick the next president, the winner of the football game, etc. It’s a fascinating idea that we love to make predictions, especially in the short term.
The problem is how often are you right? How often do you guess correctly what the outcome will be?
Even when you list the reasons why you think a certain outcome will come about to try and convince yourself does that do anything to change the outcome? Maybe, because it makes you feel confident in something you truly have no control over.
Some of the biggest predictions that get made are through sports and the stock market. Every year so-called experts make their predictions to try and get close to where the stock market will end up. Their premise, I’m assuming, is that if people see how great their prediction was, they may continue to listen to them as an expert. The problem is, are these people really experts or are they just making short term predictions and hoping their arguments will convince you they should be right?
And an even bigger problem is that no one holds these predictions accountable. Want to see what I mean. Below is the 2015 predictions made by experts at certain media outlets and how close their predictions were:
Author note: I don’t make predictions, I merely find the people who do and point out how lousy theirs were.
“There is overwhelming evidence that the next stock market crash could strike any day now. By Christian Hill, 1/13/15 Moneynews.com” – The market I’m assuming he is referencing the S&P 500 which advanced 2.15% *yahoo finance until August when it went negative. I guess 8 months is any day now…
“Investing pros surveyed by CNNMoney expect the S&P 500 to climb to 2,184 by the end of next year, implying an 8% gain from Friday’s close.” – The S&P 500 was actually at 2043 on 12/31/15 or down -0.69% *yahoo finance. Not only were they off but they were wayyyy off by 8.69%.
“The average stock will do better than the average index. As soldiers have done better than the generals over the long run, I expect a reversion to the mean. Total return: 10% -12%, or even a little higher.” John Buckingham from Thinkadvisor. – If by the market he means S&P500, he was off by about 10.69% *yahoo finance.
“Bullish, but not wildly bullish. Total return: 6%-10%. Not bad.” Scott Wren from Thinkadvisor – See above comments, this is too easy.
“The strategists polled by CNNMoney expect crude oil to bounce back from current levels and end next year at about $74 a barrel” – Oil finished at around $37 a barrel on 12/31/2015 and has continued to drop since *Marketwatch. Let me repeat that, it finished at $37 a barrel and these are so-called experts!
And finally, “The boo birds always come out, but historically speaking, the smart money has to be on stocks moving higher. The uptick in energy prices will likely be minor through 2015, but it should happen.” from Rick Aristotle Munarriz Yahoo Finance. – Nope, it never did. Perhaps in the long term but not in the short term as predicted.
When predictions go wrong
The reason I don’t make predictions especially short term ones, is because it is almost impossible. Even when you are predicting something that in the long run has done well, a short term guess is all that can be made. If these so-called experts could make predictions for the long term, the outcome of their predictions would most likely be different and this brings us to this point.
Be careful who you listen to. Like most so-called experts, the above writers feel they are experts, yet how close were they in their predictions?
When there is no accountability the media and so-called experts can drive ratings by making bold claims. Predictions are fun, yes, but don’t confuse that with Investing. In my opinion, Investing isn’t about a short term view, aka a one year prediction, it’s about the long term. I’m sure most so-called experts would consider their short term predictions to be more like predicting everyday outcomes, no one knows for sure. Investing comes from staying the course for the long haul and holding a long term view which is 10-15 years.
What false predictions will come out this year, 2016? Will we even remember them by the end of the year?