Monday, December 29th, 2008
fortune tellers

It is natural to have a certain curiosity about the future.  We would all like to know today what will happen to us tomorrow, and the prospect is particularly alluring when it comes to the future course of the markets, since great riches could be ours if only someone would tell us what is in store.

I have written a number of times about the absurdity of single-point estimates in investment decision making, and also about the prevalent fascination with the thoughts and deeds of market gurus.  Those themes unite in glorious fashion now that we have entered the high season of prognostication.  The calendar will turn shortly and, since it is the time to do so, it seems that every media outlet is featuring predictions about what 2009 will bring for investors.

Of course, much of what gets featured is absolutely worthless.  You’d think after being spectacularly wrong in their predictions for 2008, the pundits would at least take a year off from their labors.  Instead, we are once again treated with estimates of where the stock market will be a year from now, prepared by the same ever-willing cast of characters.  I would like just one of them to explain to investors why their to-the-number S&P forecast is of any value whatever.  Absent that it is business as usual — another industry charade that promises analysis and delivers marketing.

Which is not to say that interviews with strategists (or others that divine the future) are not worthwhile reading.  On the contrary, they often contain valuable nuggets of insight.  A forecast for the market just never happens to be one of them; the context is more important than the conclusion, and the musings and possibilities more promising as investment ideas than the certainties.

It is standard practice for stories to be written at this time of year that are little more than a list of the market targets proclaimed by the leading lights of the dark art of prognostication.  When perusing them, it is useful to remember that those providing the predictions are in the business of getting their names and those of their firms in front of investors, and throwing out a meaningless number so that they can be featured with others willing to do the same thing gets that accomplished.  It is, therefore, more for the quoted than the audience, which usually gets, at most, some idea of the conventional wisdom of the day.

The telling of fortunes is a carefully orchestrated affair.  An air of authority and some well-chosen words can make a possibility seem likely.  Don’t forget that if it truly comes to pass, it’s just damn luck.