Pundits swing and miss on predictions

(MoneyWatch) One of my favorite hobbies is collecting forecasts. I was going through my files the other day and found a MarketWatch article from about a year ago that began with the line, "They are sentries at the stock market's wall of worry, warning investors to prepare for another epic crash for debt-laden economics." Among the sentries were Peter Schiff, Harry Dent, Gary Shilling and Robert Prechter. Let's see what they had to say at the time:

Peter Schiff: The article noted that Schiff called bonds the worst investment to be in because they hadn't been crushed, implying that they were due for a fall. At the time the 10-year Treasury bond was yielding 2.23 percent and the 30-year was yielding 3.35 percent. As I write this at the close on Feb. 7, the yields were 1.96 percent and 3.17 percent, respectively. Like the broken clock that is right twice a day, it's likely, if not certain, that one day Schiff's forecast will turn out to be right. In the meantime, he's been wrong and one reason rates have not risen as he forecasted is that inflation actually defied Schiff and fell from 3.2 percent in 2011 to just 2.1 percent in 2012.

Harry Dent: According to MarketWatch, Dent said the recovery essentially wasn't real, only a product of the quantitative easing measures in the U.S. and Europe. At the time, the S&P 500 Index was at 1,408. It closed on Feb. 7 at 1,509, an increase of 7.2 percent, not counting the return from dividends.

Gary Shilling: The article said Shilling called stocks vulnerable due to weak consumer sentiment. Average daily consumer spending rose from $74 billion in March to $80 billion in December, an increase of 8 percent in just nine months. And as we saw, the stock market rose.

Robert Prechter: In the article, Prechter advised investors to shun every currently popular asset class and simply move to cash. Cash has underperformed all major stock and bond indexes since then.

What you should know about forecasters is this: If you make enough forecasts eventually you'll be right. Even blind squirrels eventually find acorns. The key is to never give a date because then you'll never be wrong. The historical evidence demonstrates that the only value of forecasts is to provide fodder for columns such as mine. As Warren Buffett advises investors: "I continue to 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." Keep this in mind the next time you're inclined to pay attention to some guru's forecast for the market.

Image courtesy of Flickr user 401(K) 2013.

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    Larry Swedroe is a principal and director of research for the BAM Alliance. He has authored or co-authored 12 books, including his most recent, Think, Act, and Invest Like Warren Buffett. His opinions and comments expressed on this site are his own and may not accurately reflect those of the firm.

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