Motley Fool Says Ignore Stock Market Forecasts and Predictions for 2010, But...

By: Nadeem_Walayat

A recent email titled "3 Reasons You Should Ignore Predictions for 2010" from the popular UK personal finance website Motley Fool perked my interest. My immediate thought was wow are they going to state that the real secret of successful trading is to react to price movements in real time, and if so what are the other 2 reasons?

Leaving aside for the moment the contradiction in the preceding day's email also an from Motley Fool titled "6 predictions for 2010", and several more subsequent emails along the same lines.

Firstly, I don't like the word PREDICTION as no one can PREDICT the future, all one can attempt to do by means of in depth analysis is to arrive at a scenario that projects / forecasts trends based on probabilities.

Motley Fools Reasons of why you should ignore predictions for 2010 and What you should do instead. Motley Fool

1. No one -- no analyst, no economist, no politician, no academic, and no investor -- predicted with precision the 22% drop in the FTSE 100 from 1 January 2009 to 9 March 2009.

FTSE 100 Index Stock Market Forecast 2009 - 22nd January 2009

FTSE 100 Index Mid 2009 Low 3400 - 70% Confidence; End 2009 at 4,600 (During December 2009) - 70% Confidence

2. The second reason you shouldn't give much heed to predictions for 2010 is that the forecasters will alter their predictions as the year unfolds.

They are correct, forecasts have to be revised, but not for the reasons alluded to for the fulfillment of a target i.e. in this case for the FTSE low of 3,400 being fulfilled in March 2009 DID call for an update.

17 Mar 2009 - FTSE 100 Index Stealth Bull Market as Bear Market Bottoms at 3,460

This article is a quick update which includes summaries of recent analysis and the initial FTSE buy triggers for what I expect will turn out to become a multi-year bull market whilst the vast majority of market participants (small investors / analysts) FAIL to recognise the stealth bull market now underway until many months and a good 30% rally has already taken place as the perma bears that have enjoyed much press coverage as the bear market raged WILL continue to convince most investors from failing to participate, leaving only the smart money, i.e. hedge funds, fund money pools and yours truly to accumulate.

3. The final reason you shouldn't give much heed to predictions for 2010 is that the forecasters have no accountability for their predictions.

Yes, no one wants to be reminded of wrong market calls, for at the end of the day the future is unwritten and events that some call black swans can change subsequent market trends (though black swans are more often used to explain away poor analysis) which DOES mean one needs to continuously analyse the markets one trades or invests in. It is never a case of fire and forget, but more along the lines of creating a scenario and then performing periodic in depth updates as targets are achieved and triggers are hit.

However clearly, not all analysis and hence forecasts are of the same caliber, therefore IT IS important that past market calls ARE evaluated on subsequent price action as we at the market oracle are undertaking through exercise of allowing all site visitors to VOTE on the Accurate Forecast Articles Published between Sept 2008 to Sept 2009. As those that did get it right during 2009 have a greater probability of getting it right for 2010. I say probability for at the end of the day that is all a forecast can be, i.e. NOT a PREDICION OF AN EVENT, But a % probability of an scenario transpiring.

Now after the Motley Fools discrediting of ALL future Predictions / Forecasts for 2010 (presumably including their own), what do they advise readers should do ?

Pay £29.50 for their 10 share picks of 2010 (predicting these stocks will rise in price).

As for where I think the stock market is headed during 2010?

The analysis has been underway that will culminate in final conclusions / forecast trends in the following sequence - Inflation, economy, interest rates, housing, stocks, other markets. To receive the analysis in your email box on completion, ensure you are subscribed to my always FREE newsletter.

By Nadeem Walayat
http://www.marketoracle.co.uk

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Nadeem Walayat has over 20 years experience of trading derivatives, portfolio management and analysing the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem's forward looking analysis specialises on the housing market and interest rates. Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication. We present in-depth analysis from over 400 experienced analysts on a range of views of the probable direction of the financial markets. Thus enabling our readers to arrive at an informed opinion on future market direction. http://www.marketoracle.co.uk

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any trading activities.

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