Super Investors on Where’s the Stock Market Headed i.e on future, forecasts and predictions.
All the charts, computers and mathematical models in the world cannot tell us, with any certitude, what the market will do tomorrow, next month or next year.
The point is markets behave a lot like coin tosses. Coin tosses produce interesting patterns, but past patterns provide little if no guidance about how to predict patterns of the future.
Thousands of experts study overbought indicators, oversold indicators, head-and-shoulder patterns, put-call ratios, the Fed’s policy on money supply, foreign investment, the movement of the constellations through the heavens, and the moss on oak trees, and they can’t predict markets with any useful consistency, any more than the gizzard squeezers could tell the Roman emperors when the Huns would attack.
We’ve long felt that the only value of stock forecasts is to make fortune tellers look good. We believe that short-term market forecasts are poison and should be kept locked up in a safe place, away from children and also from grown-ups who behave in the market like children.
People have always had this craving to have someone tell them the future. Long ago, kings would hire people to read sheep guts. There’s always been a market for people who pretend to know the future. Listening to today’s forecasters is just as crazy as when the king hired the guy to look at the sheep guts. It happens over and over and over.
John Kenneth Galbraith
There are two classes of forecasters:Those who don’t know and those who don’t know they don’t know.
We will continue to ignore political and economic forecasts which are an expensive distraction for many investors and businessmen.
There are 60,000 economists in the U.S., many of them employed full-time trying to forecast recessions and interest rates, and if they could do it successfully twice in a row, they’d all be millionaires by now. As far as I know, most of them are still gainfully employed, which ought to tell us something.
If I’ve noticed anything over these sixty years on wall street it’s that people do not succeed in forecasting what’s going to happen to the stock market.
Forecasts often do more harm than good since they offer a false precision and thereby give me a false sense of confidence.
We do not have, never have had and never will have an opinion about where the stock market, interest rates or business activity will be a year from now.
Absent a lot of surprises, stocks are relatively predictable over twenty years. As to whether they’re going to be higher or lower in two to three years, you might as well flip a coin to decide.
If they knew in February that the Dow was going to 865 in May, why didn’t they let me in on it then; and if they didn’t know what was going to happen during the ensuing three months back in February, how do they know in May?
Those who have knowledge, don’t predict. Those who predict, don’t have knowledge.
Moral of the Story [Warren Buffett]
It’s far easier to tell what will happen then when it will happen.