There is an overwhelming body of evidence on the inability of forecasters to make accurate predictions. Take, for example, this last week in the equity markets. We saw a 400 point free fall followed by a 100 plus rally the following day. As I am writing this, the market is up all most 300 points! None of the so called forecasters I follow had any information on this action. As I have said before, no one can predict with any accuracy what the stock or the bond markets are going to do.
A year ago, Reuters’ news agency polled 16 money market dealers who do business directly with the Federal Reserve. One would think that these guys would have a pretty good handle on interest rates. Their consensus forecast was for the 10-year Treasury note yields to rise from 2.5 percent to 3.2percent by September 2011.
This has been a very crazy year and it is not over yet. Volatility created a new paradigm whereby 300 to 400 point days have become the norm and many money managers are scrambling to adjust allocations to dampen the effects of a manic depressive market.
In the end price will win. Down days allow us to buy equities at drastically reduced prices. I will be doing a video on various market observations Nov. 14, so look for the email.