Goldman Sachs' Cohen: The Most Useless Forecast of 2009 (So Far)

Last Updated Aug 10, 2009 1:01 PM EDT

I was reading some financial forecasts last week when I came across a Reuters article I just loved. It was entitled "Goldman Sachs' Cohen: New bull market has begun." The article was about what Goldman Sachs strategist Abby Joseph Cohen had to say on CNBC on Thursday. Abby really went out on a limb by making the following statement:
"We do think the new bull market has begun," Cohen said. "It may prove it began in March of this year."
Way to put yourself on the line there, Abby, with your bold forecast as to when the bull may have begun! I'll admit that I don't have a fancy title like "Goldman Sachs Senior Investment Strategist and President of Global Markets Institute, or have a multi-billion investment bank behind me. But, what the heck, I'm willing to make an even bolder statement.
"The bull market definitely began in March of this year! In fact, it began on March 10 of this year!"
It's not that I disagree with the esteemed strategist; we're actually on the same page as far as March goes. I would merely like to point out that calling a bull market after U.S. stocks are up 50 percent and international stocks are up 70 percent is just a tad too late. Thus, Abby's observation gets my "locking the barn door after the horse has been stolen" nomination for the most useless forecast of the year. Though considering the year isn't over, I do reserve the right to withdraw this nomination in favor of a possibly more useless forecast.

In fairness to Abby
While my favorite part of this article was her apparent unwillingness to commit definitively to her forecasting of the past, she actually did touch on the future. She noted that Goldman Sachs sees the benchmark Standard & Poor's 500 index "in a range of 1,050-1,100 toward year-end." That translates to roughly a 5 percent to 10 percent increase. I happen to love the "toward year end" wording. That means all she needs is one five percent pop any time before December 31 to be right. Can Abby hedge her bets, or what? It doesn't matter if it closes the year at 600, as predicted by Gary Shilling, one of the few people that called 2008 correctly.

My advice
No expert has a clue what the market will do in the short-run. They may be masters of predicting the past, but the logic they use to explain what the market has done doesn't translate into extrapolating into the future. The more you invest according to people who predict Dow 40,000 or Dow 3,800, the poorer you are likely to become.

What I find particularly interesting is that no one ever really tracks the forecasts of the experts. In fact, the forecasts of the Dow 40,000 and 3,800 came from the same expert, Harry Dent, author of The Great Depression Ahead.

I know it's not good form to brag on line, but there are two things I know that the experts don't:
  • I am brilliant at forecasting the past.
  • I know I don't know what the market will do in the next few months.
So my advice is beware of strangers bearing predictions. Regardless of whether it's a financial expert or the Psychic Network, ignore them. If they don't have the sense to know that they don't know what the market will do next week, at least now you do.
  • Allan Roth On Twitter»

    Allan S. Roth is the founder of Wealth Logic, an hourly based financial planning and investment advisory firm that advises clients with portfolios ranging from $10,000 to over $50 million. The author of How a Second Grader Beats Wall Street, Roth teaches investments and behavioral finance at the University of Denver and is a frequent speaker. He is required by law to note that his columns are not meant as specific investment advice, since any advice of that sort would need to take into account such things as each reader's willingness and need to take risk. His columns will specifically avoid the foolishness of predicting the next hot stock or what the stock market will do next month.

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