The Financial experts Good, Bad and Worse

The last two post were on forecasting the markets, so I decided let me continue on forecasting. The Atlantic blogpublished a challenging article on the decision-making abilities of financial experts sometimes back, I like the arguments and the study outcomes are not surprising to me 😉

There are experts, and then there’s everybody else. In finance, experts have studied the subject and follow the markets closely, so you’d expect that they’d be superior at betting on the stock market as well as on other financial matters, right? Well, perhaps not so much. As the psychologist Philip Tetlock—who did a 20-year study on the subject—famously said:

Experts are poorer at predictions than dart-throwing monkeys. Study after study has shown that low-cost index funds—investments that track major financial market indices—outperform “actively managed” mutual funds. Continue reading “The Financial experts Good, Bad and Worse”

Short Term V/s Long Term

You are a trader or investor ? This is the difficult question that most people do not able to answer,  they take a short blogterm view and when  position goes against them, they prefer to hold the stock as long-term bet.

Most successful investors tend to have clarity of thought and look only at the larger picture. They discount all day-to-day noises and concentrate only on the fundamentals. In the end, fundamentals always prevail over speed.

here is a small description that short-term is more of an emotional based trading where as the long-term provides value for your thoughts.
Short term= Emotions

Long term= Earnings Continue reading “Short Term V/s Long Term”

Crisis Prediction

Since 2008, quite a lot of people have boldly claimed that they “predicted the crisis”. Usually, the claimants use this “fact”images to argue for the superiority of their economic school of thought, modeling approach, investing approach, or personal intuition. But what does it mean to have “predicted the crisis”?

First of all, there are different things that get labeled “the crisis”. These include:

1. The big drop in U.S. housing prices that started in 2006-7.

2. The systemic collapse of the U.S. financial industry that began in 2008.

3. The deep recession and the long stagnation that began in late 2008. Continue reading “Crisis Prediction”

Market Predications : Main Street Lambs led to the Slaughter

Paul Farrell responded to Wharton School prof Jeremy Siegel’s most recent predictions for the Dow by year-end 2013,download who said: “My Dow 17,000 projection may turn out to be too timid.”

He channels William Sherden, author of “The Fortune Sellers: The Big Business of Buying and Selling Predictions.” Sherden decided to test the accuracy of leading forecasters over a multidecade period. His conclusion: Forecasters stink.

Farrell summarizes Sherden’s findings in 11 bullet points:

1. Economists’ predictions are no better than guesses
2. Government economists often worse than guesses Continue reading “Market Predications : Main Street Lambs led to the Slaughter”