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Stopped Clocks Win

Most people claim they don’t believe in psychics (although the psychics of the world seem to be making a living, so someone must buy their game) yet millions of people look to market forecasting “experts” for investing advice. What makes one predictor of future events more credible than the other?

One of the tricks of the psychic trade is to make a lot of broad proclamations, such as: “I feel a betrayal in your past… wait… I see a woman…” or “you will meet someone special within the next year.” They know that, most of the time, their vague predictions will come close to reality. As for those that don’t? People have short memories.

Market forecasters play the same game making statements like: “The markets feels top heavy… this should lead to a correction…”  If they’re wrong, no one will remember, but if their ambiguous assertion precedes a major market decline, they are likely to be proclaimed as master market forecasters.

Becoming a well-respected market forecaster is actually easier than psychic success. Psychics have to deal with hundreds of thousands of possible situations and emotions. Market forecasters on have two situational possibilities: The market going up or the market going down. They also only need concern themselves with two emotions: Fear and greed.

To be proclaimed a fiscal prophet you merely need to pick a direction and the corresponding motion and keep at it until the market eventually moves in the predicted direction, and that’s what most of them do. There are the permanently bearish (known as “perma-bears”) and the perpetually optimistic (at least these folks are playing the averages better since stocks rise more than they fall).

Success in this field doesn’t require talent, skill, or a great deal of work. In fact, the don’t even need to perform as well as a stopped clock. While they may not make an accurate prediction for months or even years, a stopped clock gets the time right twice a day.

Woefully Misinformed

Investing Between the Lines