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[TSP_Strategy] Serendipity and a healthy discussion about the markets

 

Serendipity means a "fortunate happenstance."  In my inbox this morning next to the TSP Strategy Group email was an e-mail from Mauldin Economics. 

John Mauldin started his weekly email about his 2016 forecast by discussing the track record of forecasts in general to include the Federal Reserve (who admits their own forecasts are bad), the Congressional Budget Office (who admit their forecast are bad, but not as bad as the Fed), and economist (who never see a recession coming even when we are in one). 

As part of my study of market tops I had to include research on why so many economist and investment advisors miss them.  But who wants to hear from a "perma-bear" on the subject when John Mauldin did a much better job than I could.  John travels the world talking to economist, bankers, everyone and usually introduces a different writer every week.  This week he wrote his weekly article himself. 


The main points on forecasts:

--Wall Street's consensus S&P 500 forecast never forecast negative returns from 2000–2014 including the bear market.

--A 2015 study by Kevin J. Lansing and Benjamin Pyle of the San Francisco Federal Reserve Bank found the FOMC was persistently too optimistic about future US economic growth and...
 
(1) did not anticipate the Great Recession that started in December 2007,
(2) underestimated the severity of the downturn once it began, and
(3) consistently overpredicted the speed of the recovery that started in June 2009.

-- "you will find the CBO readily admitting that its forecasts bear little resemblance to reality. Their main defense, or maybe I should say excuse, is that the executive branch and private forecasters are even worse."

--John Mauldin on economist:

"In November of 2008, as stock markets crashed around the world, the Queen of England visited the London School of Economics to open the New Academic Building. While she was there, she listened in on academic lectures. The Queen, who studiously avoids controversy and almost never lets people know what she's actually thinking, finally asked a simple question about the financial crisis: "How come nobody could foresee it?" No one could answer her."


Michael Bond
TSPsmart.com

PS.  An alternate definition of a perma-bear:  Anyone who disagrees with a perma-bulls forecast.

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Posted by: Michael Bond <michaelhbond@yahoo.com>
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Neither the TSP Strategy group, nor individual members, are licensed or authorized to provide investment advice. Any statements made herein merely reflect the personal opinions of the individual group member. Please make your own investment decisions based upon your personal circumstances.

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