Believe you have to “predict the market’s
next move” to make money?
You need to read this book!
You’re probably suffering from one (if not all) of the Seven Deadly Investment Sins
Believing you have to be able to “predict the market” is one of what I call the Seven Deadly Investment Sins (see Chapter 2 of The Winning Investment Habits of Warren Buffett & George Soros for more).
If you’re afflicted with this belief I implore you to read The Fortune Sellers: The Big Business of Buying and Selling Predictions by William A. Sherden. Sherden does more than just survey the whole gamut of fortune-sellers, from weather forecasters, to economists, to market gurus. He measures their predictions against what he calls the “naïve forecast.”
The naïve forecast is simply: tomorrow’s weather will be the same as today’s; inflation next year will be the same as it was this year; next year’s earnings will be up (or down) X%, just like they were this year. And so on.
Through rigorous analysis, Sherden shows that only one class of forecasters beats the naïve forecast with any regularity: weather forecasters. But only for forecasts for up to four days in the future. And even then, by only a small margin.
So next time you’re tempted to listen to some guru’s market prediction, remember that you can beat any guru — on average — by simply “predicting”: the market will do tomorrow what it did today. Sherden proves this in The Fortune Sellers.