Forecasts — A Consumer Guide Part I
It is the season for forecasts. Fund managers, economists, pundits, and chief market strategists are all getting on the record for 2006. If it were easy, everyone would agree. In fact, no one can know for sure how the economy or world events or the stock market will develop over a period of one year.
It is diabolical. One can be completely right on the fundamentals and right on events, only to find that the market seems to ignore these events. In the 1998-2000 time frame, for example, many wise observers detected overvaluation in the market and a probable Y2K buying binge that was setting up an economic top. Those who were prescient enough (including quite a number of the smartest professional traders I know) did not profit from the bubble. They shorted the market, shorted again, and finally threw in the towel. Sentiment indicators were no help, since everyone just kept getting more bullish.
It is extremely difficult to be right on both the fundamentals and the catalysts that will operate on the market.
Recognizing the peril of forecasting there is little comment on the methods used by others. Each player operates from his/her own methodology. At "A Dash" we try to analyze all of the approaches, with a focus on methodology. By highlighting the strong and weak approaches, we hope to gain edge. We’ll comment on some of the leading forecasters and their approaches. We will explain why there is a (slightly) bullish consensus and what we should make of that.