DO WE REALLY NEED FORECASTING?

The great question why we need forecasting? Because we want to beat the market, it’s that simple. We want to own a super profitable portfolio. And, we do believe that there is somewhere in the planet a guru who knows better what holds the future than us. That is the reason why we are reading forecasts.

But is really out there any good forecaster? I doubt that.

There is a research by FED of Philadelphia which studied the professional forecasters between 1968 and 1989. The data show clearly in most of the cases their indication was contrarian, happen the opposite. If they forecasted bull market bear market came and vice- versa. These experts always work from yesterday data and want to forecast tomorrow, it is impossible. We are only guessing. That is why they have mostly wrong conclusion.

In 2013 January according to Bloomberg Wall Street Firm’s 50 stocks recommendations, the companies with the most sell ratings outperformed the market by a median 25%. And, the most buy ratings underperformed by more than7%.

Last year the SP500 made a great rally with 32% gain and closed the year at 1,848. In 2013 January the best Wall Street analyst said the price could hit the 1,615, it was Citi. Wells Fargo forecasted 1,390points which mean they believed in a real falling market.

Why they are doing further this bad quality job? Because they need to do that, there is a huge demand on the market for that nice marketing staff. We as investors love to hear brilliant ideas from smart analysts and companies.

The BFM Assets Team.