Thursday, January 03, 2008

2007 Business Week Predictions...Another Waste of Ink

We are in the middle of hearing from the experts again about what they think will happen in 2008. Isn't it funny that none of results of these "experts" past predictions/forcasts are ever printed (unless one of them is right). I decided to dig up some predictions for 2007 and see how the so called experts faired. They didn't do so well. Hit the link above to see the full list of 80 Business Week experts and there 2007 forecasts, I'll summarize.

The experts where to predict where the S & P 500, Dow Jones Industrial Average, Russell 2000 and the Ten Year Treasury bond would end up on 12/31/2007. Of the 80 experts, on one was close to being correct on each prediction, Barry Ritholz of Ritholz Research and Analytics - though he was way off on his prediction of the where the Russell 2000 would end up (off by about 11%). He was even right on with his stock pick - it quadrupled during 2007. Don't rush out to buy Barry's research though, someone had to be right, it just happened to have been his turn. The other 79 weren't so lucky.

Of the 80 predictions only 11 came within 20 points of where the S & P 500 would close - 1,465.61.

Only 13 came within 100 points of where the Dow Jones would close - 13,264.82.

Only 14 came within 25 points of where the NASDAQ would close - 2,651.07.

Only 5 came within 10 points of where the Russell 2000 would close - 766.21.

Finally - only 5 of these experts could predict where the 10 year Treasury bond would end the year at within 10 basis points - 4.035%.

This once again proves my theory that the experts aren't worth listening too. Statistically we would probably expect better results - the fact that we didn't get them is even more proof that wasting your time listening to the top forecasters will not make you any money.

I can't wait till the end of 2008 to do this again!

Scott Dauenhauer, CFP, MSFP, AIF