SAY WHAT, Abby Joseph Cohen?

Muckdog at The Learning Curve got out of his sick bed to do some fact checking after a CNBC interview.  Take a look at what he found, and then I’ll answer the question he poses.

Link: SAY WHAT, Abby Joseph Cohen?.

CNBC’s Erin Burnett interviewed Abby Joseph Cohen this morning.  Erin introduced Abby as "perennially bullish."  Abby corrected Erin, saying that in March of 2000, she was recommending folks to sell stocks.

Now, to Muckdog’s question:  My first reaction when she claimed to have issued a "sell" warning in 2000 was the same as his.  Not how I remembered it, but I’ll bet most people took her answer at face value.

More generally, most consumers of forecasts do not understand the "error band" for model predictions.  Even when the model forecast of fair value is great, a stock or an index can stay out of line for a long time.

I think that the highly visible people, like Cohen, now tone down their predicitons.  Why say the market is 30% under-valued, for example.  If you say it is 15%, and if the market does rally, you get full credit for being bullish.  I discussed some of the problems with these predicitons in my January "Consumer Guide to Forecasts."