Chart Of The Day: 'Just A Little Bit Off'

Tyler Durden's picture

"If you have to forecast, forecast often"


  -  Edgar Fiedler, assistant Treasury secretary for economic policy under Nixon/Ford administrations

Need just one chart to avoid anyone who says they have any idea where the S&P will close in three years... or two... or one? Here it is: the graphic below shows that when it comes to predicting the closing level of the S&P several years into the future, absolutely nobody, and certainly not the consensus outlook, has any clue. However, they sure make up for lack of accuracy and insight with hope, optimism, and relentless persistence and enthusiasm to be wrong again and again and again.

Source: Global High Yield Perspectives - Brandywine Global Investment Management

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Big Beta Bill's picture

I am very bearish.  Any disruption in this market and risk on takes things down fast.  China is a mystery, Europe is on the verge of a meltdown and there is no internal demand in the USA.  Somthing will blow up in 2013.

Silver Bug's picture

The people that make these absurd predications are complete hacks.

SafelyGraze's picture

on the graph, 2005 and 2006 were the best years

Boris Alatovkrap's picture

Boris is cannot remember 2005 or 2006. Complete blur. 2008 is better after remove Cesium 151 Isotope from refrigerator.

francis_sawyer's picture

Nobody could predict (with 50-50 accuracy), that the Ravens would beat Peyton Manning & the Broncos in Mile High...


[cough cough] ~ that is, of course unless your name is francis_sawyer, who explained it to you all, IN DETAIL, right here last week & got laughed at by all...

As a BONUS, I gave you Bama stomping ND in a rout on the same day...

e_goldstein's picture

Come on dude, Jesus, Allah, Moses, the Burning bush, the Burning Jew, the Chuthulu'ed out Persian, the whatever... just btfd and SLIDE.

BadKiTTy's picture

Couldnt agree more! I would only add that I feel like I have had my fingers in my ears (so as not to go deaf from the explosion) since 2008! 

No kidding but I am trying to scrape my eyes away from reading ZH so I can get on with my life......

And as you can tell by the very existence of my comment I am failing! 



Pareto's picture

But. At least it's productive in that you're learning something, or, at least I am anyways. Not getting rich at it but not losing either. That's gotta count for something.

Water Is Wet's picture

I don't know.  It kinda looks like since the suspension of mark-to-market the analysts have gotten a lot better.

Milton Waddams's picture

Simple: pessimism doesn't move product.

formadesika3's picture

The market can be wrong a lot longer than I can stay sober.

zorba THE GREEK's picture

Here's a prediction; when the market is too high it will eventually come down,

when the market is too low it will eventually go up. When the market is manipulated,

it will eventually collapse.

ultraticum's picture

They all begin with a dead cat bounce . . . .

Seasmoke's picture

Doesn't it just go up 7.5% every year. That's what the public pensions have us believing , so it must be true.

tooriskytoinvest's picture

Bill Gross of PIMCO And Two Top Federal Reserve Policymakers Warn of Impending Inflation

Pareto's picture

Have no idea how this chart works.

farragut's picture

Kudos for a very dry sense of humor (unless of course, you're being serious). In that case...,

My guess would be this chart shows the average increases or decreases of S&P 500 earnings estimates during the 12 months following the publication of the estimates. Since each year's estimates may be very different ($95 one year, $120 the next), the chart author has 'normalized' all the the estimates to a starting point of 100, which then makes a multi-year comparison of subsequent revisions easier to see. Take 1995 for example: the consensus estimate for earnings of the entire S&P were $100 (this is just a guess on my part to illustrate how the graph works). Throughout the next 12 months, estimates were revised down to $93-$94, then raised to $96-$97 by the end of the year. In 2005, estimates were published, then revised upward by almost 20%, then downward slightly at the tail end of the year. A cursory glance will tell you that 2005 and 2006 were atypical. The vast majority of annual earnings estimates are revised downward.

The takeaway from the graph is that initial estimates from Wall St tend to be optimistic--laughably so, in some years. The larger picture, as long-time ZH'ers already know, is that *any* estimate from anyone (ie, financial services, govt, your 9 year old son) is likely to be overly optimistic, and should be taken with a very large grain of salt. The even larger picture, of course, is we're all buggered in the end so let's not futz too much over a few percentage points, right?  :-)

Pareto's picture

Thanks for the explanation. It's true. As laughable as it is, I didn't understand it. Now I do.

PhD's picture

Have been developing a new Macroeconomic model as a part of my PhD.

You should check out the brand new forecasting methodology i have developed.

Latest data is for October:

(Page is still under construction! )

Withdrawn Sanction's picture

Interesting.  Looks like it generates its fair share of false positives.  How does it differ from, say, railcar loadings, electricity consumption, and other inputs that have been tried w/very mixed success to predict economic turns?  Good luck w/it though (sincerely).

Dr. Engali's picture

Their problem is they didn't ask the Bernank where he was going to have the S&P end the year. That and the statement " the market looks a bit over priced and it looks to have a flat to down year" doesn't sell stocks.

q99x2's picture

I like to use the IChing. You can interpret it before and after the results are in and still come out looking good.

Popo's picture

It told me "Destruction". How does one interpret that positively!


Iam Yue2's picture

I use the old chicken bone method. I have beaten a majority of hedge funds, in each of the last thirteen years, and now drive a three seater rickshaw.

mkhs's picture

Well that beats my "entrails of a chicken" method.  Congratulations.

Stuck on Zero's picture

The problem is Black Swans.  They crap all over the most thoughtful predictions.


Withdrawn Sanction's picture

If that were true, you'd have a perfect contrary indicator.

Downtoolong's picture

No wonder Wall Street thinks the long term is 90 days, and a year is effectively infinity.