Pardon our Dust

The Market Scoreboard is moving hosting and going through a redesign. Pardon my dust while I move the site to its new home and lay the foundation for more insight on people's lack of foresight.


In Which Predictions of Doom are Doomed

It was June 5, 2013 that MarketWatch published an article to the effect of assigning an 87% chance of a stock market crash by the end of 2013. 87% is about a 6 out of 7 chance; a pretty sure thing. But more than that, 87% is a very specific number. MarketWatch was wrong. We know this because the S&P 500 rose steadily through the year and didn't crash at all (not even a bit.) But since they used 87% specifically they are also ridiculously wrong. A fact that will not escape the Scoreboard (unfortunately, the Scoreboard only records whether you were right or wrong, but after this I'm mulling over adding a "ridiculously wrong" mark as well.)

I guess that if you are going to pretend that you can predict the future you might as well go all the way, pull out all of the stops, and pretend that you can predict the future with amazing precision.


Gold Shmold

The fact that predicting the future is impossible is a running theme of this Website. I enjoy collecting examples which underline this fact from far, wide and in this case, long ago.

Here is a quote from the Oklahoma Historical Society's "Chronicles of Oklahoma" recalling the how Governor Mason was reluctant to beleive that there was gold in California. This would be one of the greatest oversights in modern history as the California gold rush went to shape the history of America and by extension, the history of the world:

"Two men arrived at Sherman's office one day early in 1848, bearing a letter to Governor Mason from John A. Butter, asking to be allowed to preempt land on which gold had been discovered. Captain Sutter's messengers also brought half an ounce of placer-gold from a deposit near a saw-mill he owned in the Sierra Nevada Mountains. Sherman, who had seen gold in Georgia in 1844, was excited about the find in California. Mason ordered Sherman to write Sutter that California was still under Mexican law and would remain so until the United States set up a civil government. The Governor was not interested in the discovery of gold until Sherman urged him to make an investigation."


A Random Walk Up Wrong Street

You have to persist and get through a few layers of indirection before you find the following quote from UBS floor manager Art Cashin from an October 9, 2009 washingtonpost.com article:

"i think you might see them but I don't think you'll substantially exceed them. We're in an extended cycle now that has occurred over and over again. It's like the Bible says: 'Seven lean years and seven fat years.' I think we're going to be in a period of churning sideways for several years to come."

The S&P 500 was around 1,065 when the article was published and has since risen in as a consistent manner as a random-walk would permit to its current value of around 1,750. We can safely mark this prediction as a failure for UBS on The Scoreboard.


The Bold and the Wrong

Today we pick up Kiplinger's predictions, made in January of 2012, about the year that was. Their prediction is nothing but specific, and as Judge John Hodgman says: "specificity is the soul of narrative". Here is that narrative as quoted from the article: "Figure on profits for companies in the S&P 500 to improve by 6% to 7% in 2012, a bit less than perennially optimistic Wall Street analysts expect. If the market maintains its current price-earnings ratio of about 12, the S&P index, which closed at 1253 on November 4, should appreciate by the same amount".

We shouldn't even break a sweat doing the analysis so let's get to it. The opening value for the S&P 500 on the 30th of December 2011 was around 1,262, and it closed on December 3rd 2012 at 1,426. Which in my calculations is about 13%.

Kiplinger missed by 6%, or half of the actual growth, which is too much for me to be able to mark their prediction as anything but a failure on The Market Scoreboard.