Stocks down on strong economic news

In this Dec. 26, 2010 photo, a sign advertises that a new Target store is hiring workers in Marborough, Mass.
AP Photo

The top Yahoo Finance story paints a much better-than-expected picture of our economic and political future. Yet stocks are currently down a bit in the U.S. and even more internationally. What gives?

The very emotionally unsatisfying answer is that I really don't know. If stocks close lower today, the media will certainly come up with an explanation. Perhaps it will be one of the following:


-- Market down as investors don't see the right kind of job growth

-- Market down on continued European debt worries

-- Market shrugs off good news and sees more bad times ahead

The lesson: In reality, the market is a complex organism that isn't always easy to predict in hindsight. It fools the so-called strategists daily, monthly, and year after year. Remember the S&P downgrade of the US Treasuries followed by soaring Treasury prices? The annual forecasts produce constantly dismal results.

So the next time you hear an economist making a prediction, remember two things:

-- He is unlikely to be right

-- Even if he is right, you may still lose money in the market

Admit you have a prediction addiction. Just don't act on it. Have a little chuckle when you see the media explain the market results each day.

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    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.