Experts - Has your view changed?

[Mysto]

I find that now, when I watch or read financial information from the experts, I tend to discard most of it. All I can think is that we just went through the most significant financial event since the great depression and ,arguably, no one saw it coming. (I know the permabears, did but a stopped clock...). They all knew everything, then it hit and they all went scrambling - now they again are all knowing.

My feeling - I'm as smart or smarter than most of them and I know that I don't know much. It's hard to take anything they say seriously, at least for me.

How about you?

 

[novaman]

Agreed- I'm no expert, but I had a strong gut feeling at the start of 2009 that I should really abandon my buy and hold strategy and get out. Unfortunately I remained disciplined and paid dearly for it. I managed to stay in and get back to even but again my gut started telling me that things aren't right back in September so I've been on the sidelines ever since.

The experts like to try and explain why the markets react the way they do....but they really are just making guesses that aren't much better than yours or mine.

 

[Gone4Good]

My feeling - I'm as smart or smarter than most of them and I know that I don't know much. It's hard to take anything they say seriously, at least for me.

Predicting the future is hard, borderline impossible. And because I didn't expect perfection from the "experts" heading in, my views of them haven't much changed now. And while I may be as smart as any of them (or not), I don't spend all of my waking hours researching the specific things they dig into. So they will often know a lot more than me, and their knowledge is always useful, even if their conclusions aren't.

 

[audreyh1]

It didn't take long to figure out that most of the so-called "experts" are full of $hit.

What you see on the financial networks are just "talking heads" trotted out by finance TV just to fill the airtime. Most of them just parrot conventional wisdom without offering any deeper analysis. And most of them can't even see what is right in front of their face let alone predict the future.

Audrey

 

[Earl E Retyre]

There is an interesting article on msn.com this morning that I believe relates to this post. See Irrational US investors will always lose to Wall Street - MSN Money.

The title and subtitle says, "American investors: Predictably stupid.
Not only are our brains irrational, but our behavior is easily predicted by wolves on Wall Street, who are only too eager to lead us sheep to the slaughterhouse."

I am not saying I agree or disagree with the article. But I am starting to see more people questioning stock market investments and strategies. Makes me even more confused on the best thing to do at this point.

 

[brewer12345]

Actually, what I have noticed is the influence on the media. CNBC is really bad about this, but even Bloomberg does it. They pick wh to focus on depending on which direction the herd shifts towards, and they do it in lighting speed. If the market is up for a few days in a row, you will generally see interviews with the people who are always optimistic or just happen to be now, and vice versa.

 

[LOL!]

Makes me even more confused on the best thing to do at this point.

So you have succumbed to sheep mode. That's too bad.

For a take on the article from folks who are not confused, check out this link:
Bogleheads :: View topic - What do you think about this article by Paul B Farrell?

 

[easysurfer]

My view has changed a long time ago. Can't believe everything you say and hear.

I think the situation is the "experts" can only be accurate in generalities (such as in the long run ...), but that's boring.

It's kind of like sports. Before the superbowl, it's fun to say "I know this team will win, for these reasons ...." But who really knows for sure what will happen.

 

[REWahoo]

Paul B. Farrell has seen disaster looming around every bend for the past 20 years. He's not a permabear, he's an Armageddonist.

 

[ejman]

The experts that have worked for me have been along the lines of Bogle, Bernstein et al. Set an asset allocation that works for you and reset it when it gets too far out of line (you decide how far is too far). Then go live your life. I've run my numbers through every sort of simulation I can think of and they uniformly say that even the great depression would have been survivable. A great thundering voice from above telling me "YOU'LL BE FINE _ DON'T WORRY" would be nice but short of that, I'll stick to what I'm doing. Incidentally, I've noticed life is much nicer since I stopped watching MSNBC

 

[73ss454]

I'm convinced that no one and I mean no one has any idea of what's going to happen in the future as far as the markets go. I always find it funny when one of the TV programs brings on a bunch of experts and they can never agree. I think, I think, I think is as much as they or anyone else knows.

 

[travelover]

I figured this out when the CIA missed the end of the cold war.

 

[W2R]

I find that now, when I watch or read financial information from the experts, I tend to discard most of it. All I can think is that we just went through the most significant financial event since the great depression and ,arguably, no one saw it coming. (I know the permabears, did but a stopped clock...). They all knew everything, then it hit and they all went scrambling - now they again are all knowing.

My feeling - I'm as smart or smarter than most of them and I know that I don't know much. It's hard to take anything they say seriously, at least for me.

How about you?

I think they are in the business of making money. So, I tend to take whatever they say with a grain of salt.

Personally I am in the "establish an asset allocation, hold, and rebalance as needed" camp and my portfolio has a pronounced Bogleheadish flavor, with broad index funds, etc. The pronouncements of so-called financial experts have not inspired me to buy or sell.

 

[FIREd]

When I watch CNBC and see 2 "experts" looking at the same set of data and somehow coming to diametrically opposed conclusions, then I know that these so-called "experts" know as much about the future as I do...

 

[audreyh1]

Actually, what I have noticed is the influence on the media. CNBC is really bad about this, but even Bloomberg does it. They pick wh to focus on depending on which direction the herd shifts towards, and they do it in lighting speed. If the market is up for a few days in a row, you will generally see interviews with the people who are always optimistic or just happen to be now, and vice versa.

It's really bad! And CNBC is really bad about it. It becomes so annoying. Well, I essentially quit listening to CNBC a while ago. I mute it to see the indices, etc. and then turn it off.

Audrey

 

[kcowan]

I consider the talking heads to be the same as weather forecasters. And they are about as useful to my portfolio...

 

[rmark]

Actually, weather forecasters do pretty good compared market gurus. I like to read financial porn, but when it comes down to it I go to the source I know can trust - the magic 8 ball.

 

[Nords]

I find that now, when I watch or read financial information from the experts, I tend to discard most of it. All I can think is that we just went through the most significant financial event since the great depression and ,arguably, no one saw it coming. (I know the permabears, did but a stopped clock...). They all knew everything, then it hit and they all went scrambling - now they again are all knowing.

Ironically lots of people saw it coming but didn't believe the results would be so bad.

Even the guys who predicted the mortgage implosion realized that their bets were only going to pay off if AIG and Goldman Sachs had the money to pay up. The shorts could've let their investments go even higher, but they were scrambling to sell off their positions before their counterparties went bankrupt.

There are lots of good books covering the past couple of years, but Michael Lewis' "The Big Short" describes the epiphany that swept through the major investment houses just as things started to unravel. What I learned is from reading it is that I only would've seen it coming if I'd been part of the industry, and that the prediction was irrelevant-- a good asset allocation can get through the worst of it.

I've also learned not to go with my "gut"! One of our biggest strengths of getting through the last couple years has been an AA plan that helped us figure out when to rebalance instead of agonizing over a bunch of entrails. If your "gut" is telling you to get onto the sidelines, what it's really telling you is that your AA was wrong for you in the first place.

 

[audreyh1]

Actually, weather forecasters do pretty good compared market gurus. I like to read financial porn, but when it comes down to it I go to the source I know can trust - the magic 8 ball.

Yes! Weather forecasting these days is pretty darn reliable! What a difference compared to 30 years ago.

They just needed really big computers to run the models with enough detail, plus collect massive amounts of weather data as input.

Somehow, that is just not going to work with finances/investing because millions of humans (and their computers) participate in a multi-level feedback loop and you just can't model that! You can only guess....

Paying attention to macro conditions help make someone a better predictor, IMO, but I'm usually amazed at how much effort talking heads put into spinning the data to fit their preconceived view of the future, rather than refining their outlook. Human nature! But in this area, being stubborn can really cost you money!

Audrey

 

[HFWR]

Most of the talking heads are concerned with short-term market moves. I am concerned with owning companies, or in my case "the market", and benefiting from any growth and dividends. The guy running the local 7-11 or restaurant doesn't buy and sell their business every hour/day/week/month, because they are "owners", not [-]gamblers[/-] traders.

 

[ksr]

Incidentally, I've noticed life is much nicer since I stopped watching MSNBC

So true! When the meltdown hit, my SO insisted on watching every possible financial show he could find - MSNBC, CNBC, you name it. I got sucked into it, and ended up literally feeling sick to my stomach most of the time (although I managed to not do anything rash with my portfolio). When the recovery started and things started returning to normal, I told him that I would no longer watch those shows, and that whenever the next inevitable market downturn started, I didn't want to hear the dirty details. If he wants to watch them, fine, but I would leave the room.

And that is exactly what I've done for the past month or two and I feel SO much better this time around.

 

[RonBoyd]

If your "gut" is telling you to get onto the sidelines, what it's really telling you is that your AA was wrong for you in the first place.

+1

 

[easysurfer]

I was running some errands today and was listening to a personal finance program on a station when this topic came up. Mainly, the caller said, there's too much information, too many experts. The host of the program agreed. Called it too much noise.

He later made the analogy of trader vs investor like that of water surfer vs traveler. The trader is like the surfer, caring for each wave to avoid a crash. The investor is like the traveler who doesn't care about each wave, but only the tide. The moral was that as investors not start acting like the trader or surfer or else it would make us crash. I guess it's just another way of saying if you are in for the long term, to not focus on daily events. I enjoyed listening to the analogy anyhow.

 

[W2R]

Ironically lots of people saw it coming but didn't believe the results would be so bad.

Even the guys who predicted the mortgage implosion realized that their bets were only going to pay off if AIG and Goldman Sachs had the money to pay up. The shorts could've let their investments go even higher, but they were scrambling to sell off their positions before their counterparties went bankrupt.

There are lots of good books covering the past couple of years, but Michael Lewis' "The Big Short" describes the epiphany that swept through the major investment houses just as things started to unravel. What I learned is from reading it is that I only would've seen it coming if I'd been part of the industry, and that the prediction was irrelevant-- a good asset allocation can get through the worst of it.

I've also learned not to go with my "gut"! One of our biggest strengths of getting through the last couple years has been an AA plan that helped us figure out when to rebalance instead of agonizing over a bunch of entrails. If your "gut" is telling you to get onto the sidelines, what it's really telling you is that your AA was wrong for you in the first place.

In my opinion this is an excellent post, one of the best posts I have seen to date on this board. I particularly like the last paragraph and the last sentence of the previous paragraph which I have put in bold. It has been said so many times, and in so many ways, but this paragraph really drives the point home. If people would just read and heed this section I suspect the level of angst on the board would decline dramatically.

 

[ESRwannabe]

I find that now, when I watch or read financial information from the experts, I tend to discard most of it. All I can think is that we just went through the most significant financial event since the great depression and ,arguably, no one saw it coming. (I know the permabears, did but a stopped clock...). They all knew everything, then it hit and they all went scrambling - now they again are all knowing.

My feeling - I'm as smart or smarter than most of them and I know that I don't know much. It's hard to take anything they say seriously, at least for me.

How about you?

I saw the dot com bubble, the housing bubble and the brief oil bubble, all before they collapsed... Probably it is because I am cynic/realist. What I didn't expect was how much damage the housing bubble would cause. I had figured that it would only hurt the REITs, which I had intentionally avoided. I had no idea it would clobber the bankers so hard. I greatly overestimated the risk management of the financial industry and I will never do that again.

I have lived most of my life during a time when stocks were very overpriced. I think many stocks are fairly priced right now and am buying as much as I can, selectively. My gut feeling is that the recent "flash crash" was the last straw for the majority of, baby boomer and gen x, retail investors. I think stocks will stay fairly priced for many years. That is my hope at least. I am focused on buying stocks for dividend growth. So, if share price stays flat for the next decade that would be fantastic.

Having said that, I am paranoid about the current stock prices. I have never seen them reasonably priced before and I feel like I need to "get while the getting is good." I have cut my expenses and postponed buying things that I really want. So, that I can put as much money as I can in now. I would like to think that many retail investors are so demoralised by now that they will not get back in and drive prices up. However, I can't take the chance. The "animal spirits" are hard to kill off.