Listening to Financial Pundits

[RonBoyd]

The Dangers of Listening to Financial Pundits

Nothing new here:

Turn on any financial news channel, and you’ll see a parade of people proffering opinions on market direction, economic conditions, interest rates, corporate earnings and various other topics.

Most of these pundits are intelligent enough, and they seem to make sense. After all, if there is potential danger lurking in a central bank action or a change in commodity prices, don’t you need to know about it? If a smart, knowledgeable person has advice on how to invest, based on forecasts or current events, shouldn’t you act upon it?

For both questions, the answer is nearly always “no.”

 

[Big_Hitter]

if those squawkers knew anything they wouldn't be on TV - they would stay quiet and make bank

 

[Totoro]

I liked this book dealing with this subject - I read it this month (Charlie Munger plugged it in an interview somewhere, so I picked it up):

http://www.nytimes.com/2011/03/27/books/review/book-review-future-babble-by-dan-gardner.html

Explains a bit why pundits are still there, even if they are pretty useless in terms of accuracy.

 

[Del Q]

I actually feel safer when I hear negative news. It's when I hear everyone saying that everything is great and telling us "it can't go down" that I get scared.

 

[John Galt III]

One thing they got right (not the pundits, but NPR radio stations) was the 2008 real estate / derivative meltdown. I kept hearing dire warnings on radio stations about imminent collapse of real estate due to massive fraud being conducted by banks, in plain sight. Liar loans, robosigning, repackaging risky loans, labeling them Grade A and selling them to Chinese, etc, etc, etc. I heard these sky-is-falling reports for about 6 months before the stock market started to crumble. Of course the *pundits* were denying there was a problem until the last minute. NPR radio were the ones issuing the dire warnings.

 

[ExFlyBoy5]

One thing they got right (not the pundits, but NPR radio stations) was the 2008 real estate / derivative meltdown. I kept hearing dire warnings on radio stations about imminent collapse of real estate due to massive fraud being conducted by banks, in plain sight. Liar loans, robosigning, repackaging risky loans, labeling them Grade A and selling them to Chinese, etc, etc, etc. I heard these sky-is-falling reports for about 6 months before the stock market started to crumble. Of course the *pundits* were denying there was a problem until the last minute. NPR radio were the ones issuing the dire warnings.

I think that unless you lived under a rock or were totally oblivious to the signs that a melt down was inevitable, then you could have seen it coming a mile away. The sheeple aren't that smart though.

Sent from my mobile device so please excuse grammatical errors.

 

[HFWR]

Pundits in general are "selling" you something...

 

[Totoro]

I was pretty oblivious right up to mid 2008 or so I think. Too late to do anything about it in any case. I wasn't living under a rock at the time

A few months later new reality set in pretty sudden. Luckily my company was one of the few actually benefiting from the meltdown.

 

[bclover]

LOL in my life time I've heard the following predictions.
1) the communist were going to bomb/destroy the country (anyone else have drills in school where you had to hide under your desk?? like that was going to save you)

2) African Americans getting the right to vote was going to destroy the country
3) flying cars were going to make it easier to get around
4) womens right's were going to destroy America
5) gay rights were going to destroy America
6) we were all going to be Muslim

Now I haven't followed financial pundits, it seems though every week I got an email from Motely fool saying the next big crash is just around the corner but outside of getting everybody worked up I can't figure out their function.

 

[athena53]

I like Cramer. My feeling is that you have to keep an eye on the most popular pundits because so many people listen to them that what they say can drive the market even if they're full of crap. I think Cramer is pretty reasonable, though, and provides good perspective on why a possible Greek default, for example, can affect our own holdings in a company that has no ties to Greece, and whether or not it's likely to have lasting effect. I did cringe when he quoted another pundit who calls herself the Fibonacci Queen. I think the Fibonacci series is really cool but find a hard time believing it provides a realistic way to predict stock market movements.

 

[ChicagoGal]

On the rare occasion when I happen across what any of them are saying, all I try to do is listen to the logic (if there is any provided) behind their remarks. That may give me some food for thought as I go ahead and draw my own conclusions.

All too often, though, it seems that the advice is given with the only logic or rationale provided being "because I said so and I'm famous, so you must trust me."

My response to that is... no, thank you

 

[Danmar]

Yes, they almost always say " we are in for a period of increased volatility, could go down more from here, but in the long run a good investment". Thanks for nothin. The problem is there is an "expert" for every opinion. Depends on which one they put on that day. Mostly totally useless stuff.

 

[Walt34]

Who needs a pundit? I've got my own predictor:

 

[kcowan]

What I love is there reasons for any market action. Oh it is uncertainty of Greece! Oh Janet has made a worrying statement. Oh the market is down because of concerns about unemployment.

These people know nothing. They work as network hacks. If you follow Jim Cramer in your investing, I feel sorry for you. He is right 47% of the time. Just slightly worse than a coin toss!

 

[ls99]

Pundits ans consultants have a lot in common:

They are like seagulls, fly in, make a lot of noise, leave crap all over the place then fly away.

 

[kcowan]

Never forget that pundits of all types are just earning a living. If they are not controversial, they don't make as much money.

 

[Mr._Graybeard]

One pundit who caught my attention in 2007 was a Milwaukee financial guy named Bob Landaas. During a radio interview he talked about how the yield curve had become inverted and the implications for the economy. I already thought the investment climate at the time sucked, but Landaas' observation convinced me to load up on cash.

 

[big-papa]

LOL in my life time I've heard the following predictions.
1) the communist were going to bomb/destroy the country (anyone else have drills in school where you had to hide under your desk?? like that was going to save you)

2) African Americans getting the right to vote was going to destroy the country
3) flying cars were going to make it easier to get around
4) womens right's were going to destroy America
5) gay rights were going to destroy America
6) we were all going to be Muslim

Now I haven't followed financial pundits, it seems though every week I got an email from Motely fool saying the next big crash is just around the corner but outside of getting everybody worked up I can't figure out their function.

7) We would all have jetpacks by now. Where's my jetpack?

 

[Danmar]

Never forget that pundits of all types are just earning a living. If they are not controversial, they don't make as much money.

Yes. Also if they make one correct prediction, they quote this forever. The "experts" who correctly predicted the financial crises has grown considerably in recent years. What you don't hear is all the wrong predictions they have made.

 

[jollystomper]

The pundits are the sports equivalent of professional wrestling.

 

[HFWR]

7) We would all have jetpacks by now. Where's my jetpack?

Would you settle for a six-pack?

 

[Walt34]

7) We would all have jetpacks by now. Where's my jetpack?

They're here, but not cheap at ~$150k. Each.

Joyride on a jetpack: Taking to the 'skies' over Paris - CNN.com

 

[mickeyd]

When reading or listening to a pundit (or other wise guy) I always assume that they have a hidden agenda. This could be a book (new or old), a blog, a "gadget", or a scam that they are working. This goes for Jack Bogle or any other person that I generally agree with.

I'm not a black helicopter guy but I have not gotten where I am today by not paying attention.

 

[ERD50]

When reading or listening to a pundit (or other wise guy) I always assume that they have a hidden agenda. This could be a book (new or old), a blog, a "gadget", or a scam that they are working. This goes for Jack Bogle or any other person that I generally agree with.

I'm not a black helicopter guy but I have not gotten where I am today by not paying attention.

I agree, and sometimes the 'agenda' for them is still a win-win for all.

Think Adam Smith - the butcher, baker, brewer. They each have an agenda, but we trade with them for mutual benefit.

But always look for the agenda, and consider the price you are paying.

-ERD50

 

[ETFs_Rule]

"Nobody but nobody, has consistently guessed the direction of the bond or stock market over any meaningful length of time." - John Markese, President, American Association of Individual Investors Journal

"There is always something to worry about. Avoid weekend thinking and ignore the latest dire predictions of newscasters." -- Peter Lynch