It’s pouring, and what I thought was a small puddle actually turns out to be an ankle-deep crater that envelops my foot. Slosh. My sock drips water, and I drip hate. Slosh. My shoulders begin to resent every raindrop stowing away in my backpack. Slosh. All I can think of is how much I hate the weatherman. It was supposed to be a beautiful day. Slosh.
Besides weather forecasting, if you were wrong this often you’d be a pariah, you’d be fired, you’d be … revered? Compared to your favorite stock analysts, weathermen are rock stars. They are correct enough times that if they say you won’t need an umbrella, most people will leave it at home. What if weathermen constantly predicted sunny skies only to have their predictions rained on? Welcome to the world of stock market forecasting.
CXO Advisory took 68 “stock market forecasting gurus” and graded how often their predictions were correct. These aren’t just armchair traders, these are well respected traders you know.
Of the 68, just 35% of them were able to beat a statistical coin toss. Just 20% of them were able to beat a coin toss by more than 5%. And only 7% of them could beat a coin toss by more than 10%. If you were to average them all together in to some sort of perverse “guru forecast index”, they’d only average 47%. Slosh.
Surely the winners, the people that you see on television, the people that run the big funds, they were able to come out ahead right? You’d be surprised who’s predictions are being left out in the rain.
Jim Cramer of Mad Money (47% Accurate)
Cramer has the audacity to tell his audience how to “invest like a pro” according to his website, but his predictions can’t even beat a coin flip. Get me a sound effect board, a tacky tie, and a quarter — I’ll take him to task. The old adage says, “You are the company you keep.” So, here’s Jimmy making a cameo to talk about investing on a show hosted by a convicted felon.
“Dr. Doom” Marc Faber (47% Accurate)
Faber maintains a friendly little report named The Gloom, Boom & Doom report. He regularly appears on television espousing “corrections” on various equities. As much as I like to take my advice from a finance expert who assumes the moniker of a super villain, I typically need them to be right more than 47% of the time; particularly if they’re assuming the identity of a super villain that is a sorcerer.
Jeremy Grantham (48% Accurate)
Jerry is a British investor and Chief Strategist of Grantham Mayo Van Otterloo, AKA, GMO. They hold about 100 billion dollars in assets under management. Jeremy is widely regarded as being able to predict bubbles, which is a good talent to have. However, you have to wonder with all this future telling ability he has, why can’t he break a 48% prediction rate?
These are just a few accounts of some of the most powerful finance players in the world, and how they are faring versus the S&P. The real question is: Can you beat the talking heads, the super villains, and the Chief Strategists? For what it’s worth, I carry an umbrella in my backpack now.