["Ignore Forecasts. They're Usually Wrong."]

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larryswedroe
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["Ignore Forecasts. They're Usually Wrong."]

Post by larryswedroe » Mon Sep 12, 2016 8:44 am

This guy has been all over the TV with commercials, it's scary how many calls and emails I have gotten to comment on his views, IMO mostly from people who are experiencing confirmation bias

http://www.etf.com/sections/index-inves ... nopaging=1

Hope you find it helpful
Larry

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Blister
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Re: A look at one guru's forecasts

Post by Blister » Mon Sep 12, 2016 9:14 am

Nice reality check.
Everthing works out in the end. If it doesn't then its not the end.

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Taylor Larimore
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"Ignore Forecasts. They're Usually Wrong."

Post by Taylor Larimore » Mon Sep 12, 2016 12:33 pm

[Thread merged into here, see below. --admin LadyGeek]

Bogleheads:

Larry Swedroe, author and advisor, has written an article for ETF.com about the futility of forecasting stock market returns (Bogleheads agree):

Ignore Forecasts -- They're Usually Wrong

Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

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Johnnie
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Re: A look at one guru's forecasts

Post by Johnnie » Mon Sep 12, 2016 1:00 pm

Sigh. I have a good buddy who built a successful business and made a bundle - and is now paying good money to throw more good money at this guy's schemes.

I've preached the BH gospel with Fama's, French's, Swedroe's and Buffett's galore to back it up, but I fear there's a psychological factor: Self-made men who have been successful in one arena tend to be confident in their ability in others, which in this one means they think they can "beat the market" and outsmart all us rubes. All that insidious financial doom porn doesn't help either.
"I know nothing."

boglephreak
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Re: A look at one guru's forecasts

Post by boglephreak » Mon Sep 12, 2016 1:18 pm

as far as I am concerned, you could have ended that article with the SEC result. wow!

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Will do good
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Re: "Ignore Forecasts. They're Usually Wrong."

Post by Will do good » Mon Sep 12, 2016 1:23 pm

Taylor, Thank you for the reminder.

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larryswedroe
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Re: A look at one guru's forecasts

Post by larryswedroe » Mon Sep 12, 2016 1:42 pm

Johnnie
I completely agree. That is based on my more than 20 years experience in working with a great number of them. Their success in their own field gives them confidence in areas they don't have expertise. See the same thing with doctors, who as a group I have found to be the worst investors---they confuse intelligence with wisdom. And overconfidence leads to all kinds of mistakes including failure to diversify.
Larry

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nedsaid
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Re: "Ignore Forecasts. They're Usually Wrong."

Post by nedsaid » Mon Sep 12, 2016 2:12 pm

We need to know that is the time in the market and not the timing of the market that makes money for investors.
A fool and his money are good for business.

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Re: ["Ignore Forecasts. They're Usually Wrong."]

Post by LadyGeek » Mon Sep 12, 2016 3:38 pm

I merged Taylor Larimore's thread into here. I also retitled the thread, it seemed more appropriate.

Larry - if you disagree, you can change the thread's title by editing the Subject: line in Post #1.
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Re: "Ignore Forecasts. They're Usually Wrong."

Post by FreeAtLast » Mon Sep 12, 2016 4:04 pm

Taylor Larimore wrote:[Thread merged into here, see below. --admin LadyGeek]

Bogleheads:

Larry Swedroe, author and advisor, has written an article for ETF.com about the futility of forecasting stock market returns (Bogleheads agree):

Ignore Forecasts -- They're Usually Wrong

Best wishes.
Taylor
This article is one of Larry's best ever. Every novice investor should be required to read it. Caveat Emptor.
Illegitimi non carborundum.

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Re: ["Ignore Forecasts. They're Usually Wrong."]

Post by 2015 » Mon Sep 12, 2016 7:01 pm

The stock market is a complex adaptive system, and as such, all forecasts are speculation, at most. As Michael Mauboussin states:

“Increasingly, professionals are forced to confront decisions related to complex systems, which are by their very nature nonlinear…Complex adaptive systems effectively obscure cause and effect. You can’t make predictions in any but the broadest and vaguest terms. … complexity doesn’t lend itself to tidy mathematics in the way that some traditional, linear financial models do.”

Emphasis mine

This is exactly why I found the recent threads on valuations predicting lower market returns as observable, not actionable (it helped greatly that I had already incorporated the possibility of lower future returns in my thinking and had already prepared as such. OTOH, this was nothing more than acting in an old-fashion, prudent manner, so no new news here). Greg Morris nails observable versus actionable information here:

http://stockcharts.com/articles/dancing ... vable.html
I think the point of this entire article is to alert or remind you that there is a giant amount of information out there and that most of it is not actionable; it is only observable. Sometimes it is difficult to tell the difference so just think about putting real money into a trade based upon what you hear or read. Real money separates a lot of people from making decisions based upon observable information, no matter how convincing it is.

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larryswedroe
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Re: ["Ignore Forecasts. They're Usually Wrong."]

Post by larryswedroe » Mon Sep 12, 2016 7:13 pm

2015
Very much disagree with your view on valuation based forecasts being actionable. In fact they are very actionable, and not acting on them is ignoring important information which is that high valuations increase the likelihood of lower future returns and vice versa. Thus ignoring that fact can lead to increased likelihood of failing to achieve your goals. Of course it's not certain, just like nothing in investing is certain. But investing is about putting the odds in your favor. That's about best we can do
Larry

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njboater74
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Re: ["Ignore Forecasts. They're Usually Wrong."]

Post by njboater74 » Mon Sep 12, 2016 7:26 pm

Larry, I've enjoyed your articles and books, and have applied the advice contained therein to my portfolio.

After I read this article though, I realized that I forgot to check your wikipedia page for any hints of your sordid past. :oops:

You don't have one...yet. I guess that means you don't have a sordid past :D
When the mob and the press and the whole world tell you to move, your job is to plant yourself like a tree beside the river of truth and tell the whole world - 'No, YOU move'--Captain America, Boglehead

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Re: ["Ignore Forecasts. They're Usually Wrong."]

Post by LadyGeek » Mon Sep 12, 2016 7:41 pm

You can check the Bogleheads' wiki page: Larry Swedroe
Wiki To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.

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larryswedroe
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Re: ["Ignore Forecasts. They're Usually Wrong."]

Post by larryswedroe » Mon Sep 12, 2016 7:49 pm

NJ
Sorry to disappoint you
Larry

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arcticpineapplecorp.
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Re: ["Ignore Forecasts. They're Usually Wrong."]

Post by arcticpineapplecorp. » Mon Sep 12, 2016 8:39 pm

Great Article Larry. From the article:
The best recommendation I can give you is to stop reading forecasts from so-called gurus.
Remember we only call them gurus because the word charlatan is so hard to spell.

Johnie it's too bad your friend didn't do his homework before investing with Stansberry. If he had, all he had to do is go to the SEC's website and do a search. I did, and here's what I found:
https://secsearch.sec.gov/search?affili ... stansberry

Maybe pass it along to your friend and have him read for himself. Then see if he wants to continue investing with Stansberry. You can only lead a horse to water...

Now that that's out of the way, Larry what do you think about Sandy Jadeja's calls for upcoming dates (source: http://www.businessinsider.com/sandy-ja ... ?r=UK&IR=T) :oops:
Jadeja is convinced that the sudden declines will take place on three dates — between August 26 and August 30, September 26, and October 20, 2016 — in this "time cycle."
His first sudden decline prediction (8/26/16-8/30/16) didn't pan out (see image below). Let's see how the other dates do, shall we? Stay tuned folks. There's more to come in the next two months! Apparently Sandy forgot the old mantra, "Predict when or what, but never both."

Image
"May you live as long as you want and never want as long as you live" -- Irish Blessing | "Invest we must" -- Jack Bogle

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larryswedroe
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Re: ["Ignore Forecasts. They're Usually Wrong."]

Post by larryswedroe » Tue Sep 13, 2016 8:23 am

arctic
I was trained as economist and sold economic forecasts for Citicorp. I was taught early to forecast often, and if give a number, never give a date (:-))
Larry

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Re: ["Ignore Forecasts. They're Usually Wrong."]

Post by 2015 » Tue Sep 13, 2016 12:40 pm

larryswedroe wrote:2015
Very much disagree with your view on valuation based forecasts being actionable. In fact they are very actionable, and not acting on them is ignoring important information which is that high valuations increase the likelihood of lower future returns and vice versa. Thus ignoring that fact can lead to increased likelihood of failing to achieve your goals. Of course it's not certain, just like nothing in investing is certain. But investing is about putting the odds in your favor. That's about best we can do
Larry
Sorry Larry I should have been more clear in my post. What I meant to say was that high valuations were not actionable in my case as I had already factored possible lower returns into my planning. For those who don't do so, I agree it leads to the possibility of PF failure, an unpleasant outcome.

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Re: ["Ignore Forecasts. They're Usually Wrong."]

Post by scone » Tue Sep 13, 2016 12:59 pm

How costly does the fraud have to get, before the fraudsters are thrown in jail? :annoyed
"My bond allocation is the amount of money that I cannot afford to lose." -- Taylor Larimore

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larryswedroe
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Re: ["Ignore Forecasts. They're Usually Wrong."]

Post by larryswedroe » Tue Sep 13, 2016 4:03 pm

2015
I would say that high valuations MAY be actionable as they are usually caused by high returns, which likely means that returns were above expected and now perhaps one needs to take less risk, and thus could adjust the portfolio.
On other hand they could mean more risk is needed to achieve goal if in early stages, which doesn't mean one should take more, just that more is needed to reach a certain goal. Alternatives like saving more or working longer are other options

So my point is that investment plans are or should be living documents, not carved in stone, they should be altered to adopt to changes in assumptions.

Best wishes
Larry

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