New Year's Predictions: Worthless to Wise

There are two things I hate about this time of year; the rehashing of events we have already lived in the past year and the prediction of things to come in the next one.

I see no reason to be reminded of all the sad and awful things that have happened and been more than adequately discussed. Let’s move on. Moving on doesn’t mean trying to figure out what will happen in the future. The past is over. The future is completely unknown.

Neither of the facts stops rampant rehashing or plentiful prognosticating. So, if we must revisit the past year, let’s do so in the service of discrediting those who claim clairvoyance.

Where to start? There were so many predictions at the beginning of 2014. Rather than research the universe of fallacious forecasts, I decided to focus on a few of the predictions compiled by Philip Pearlman on Yahoo Finance (January 3, 2014).

Most were typical hedged fare like this from Ralph Acampora who stated he was “bullish for 2014 but I expect some kind of correction (maybe a bad one) during the year.” Way to go out on a limb. The stock market rises about four times more than it falls, and it always goes down somewhere along the way. We will skip these and focus on:

The bad:

Many predicted that interest rates would rise, and bond prices would fall. No one predicted the opposite, so Interest rates fell, and bond prices didn’t just rise; long-term U.S. Treasury securities gained over 25% in 2014. In a related event, 48 of 49 economists surveyed by the Wall Street Journal predicted higher interest rates in 2014. It seems everyone was wrong.

Everyone predicted that commodities and oil prices would rise in 2014. One contributor predicted “the road to $150 oil begins in late 2014.” Another was sure that oil prices would “double in gold terms.” Many predicted a dramatic increase in metals and grain pricing. Neither materialized. Metals prices fell in 2014 and grain prices ended the year lower.

The typical:

Stock predictions we all over the place, but generally everyone expected stocks to rise a bit and be “volatile” (one of the lowest risk predictions you can make).

The good:

While a couple of forecasters made correct guesses about the price of Microsoft rising or the S&P 500 closing above 2,000, nothing said was particularly accurate.

That doesn’t mean there weren’t some great predictions. I applaud these contributors:

From Barry Ritholtz at Ritholtz Wealth:

S&P500: Why are you asking me?
10 Year Bond: Could not fathom a guess
Emerging Markets: Who knows?
Fed Fund Rates: Haven’t a clue
GDP: Yes, we will probably have a GDP

And the final word from Brian Shannon of Alpha Trends:

I predict that the people foolish enough to make predictions will be set up to look like jerks next year this time

Read the Yahoo Finance prediction article from January 3, 2014

Don McDonaldComment