Investor Points of Few – How to Unmask the Market’s Dr Dooms…

I suppose after over 40 years in this business you get a little bit sick of this type of gloom-and-doom market prediction guff and nonsense…

By Alan Steel

I suppose after over 40 years in this business you get a little bit sick of this type of gloom-and-doom market prediction guff and nonsense.

That’s because so many investors fall for it and then suffer from the all-too-common buy-high-sell-low (and then blame it on the market) malaise.

Here’s how it works.

Some dour-faced media darling market pundit gets sat in front of a camera and spins out comparisons between now and 2008 or 2000-02, or 1929.

The problem is that said guru’s investment track record is more disconnected from reality than Tiger Woods on a police dash cam video at 3 a.m.

An example?

Enter Marc Faber, aka Dr Doom, who, “…believes the U.S. markets are in the midst of a gigantic bubble and when the day of reckoning comes, investors will likely lose half of their money.”

“There is a bubble in everything. Nothing in asset price is very low,” said Faber during an interview on CNBC Wednesday.

This time he targets the IT sector, and does his very popular ‘Dot-Com bubble comparison’ when he says, “We are somewhere between 1999 to 2000…” 

Ehhh…Marc, I don’t suppose you’ve seen this then?

It’s a tech stocks valuations comparison between now and the 1990s (bless your heart, Barry Ritholtz).

Here’s what else those of you who might be tempted to believe this mystical finger-in-the-air nonsense should know about Mr Faber’s predictive accuracy.

Let’s walk back through the years together to see if any of these predictions have ever come true:

* In 2016, Marc Faber predicted the S&P 500 is set to crash 50% and give back five years of its gains (CNBC, August 2016

* In 2015, he said US stocks could drop up to 40% (CNBC, July 2015)

* In 2015, he predicted that Gold would rally 30% (MarketWatch, January 2015)

* Faber said the market would continue to decline in 2014 (Yahoo! Finance, December 2013)

* In August 2013, he predicted that a 1987-style crash is coming (CNBC, August 2013)

* In 2012, Faber called for a 20% market slide (Money Morning, November 2012)

* In his report in 2011, enchantingly entitled the End Game Has Begun, he says, “I feel that if the stock market in the US declines 10% or 20%, we would have QE3, in other words more money printing.” (BBC, January 2011)

And so on…

Now, at very least the above should make you wonder why CNBC continue to invite him back on as a market soothsayer.

So, do you want to know how many of predictions have been right?

Zilch. Zero. None. Nada.

This is a simple yet hugely important investor lesson: The next time you watch one of these folks spin their tale of market woe, take to the Internet and Google their name, along with the words “Prediction” and a year (2016, 2015, 2014, 2013, 2012, etc.).

That’s when you’ll know.

You see, in this wonderful age of global connectivity and instantaneous information at the click of a mouse, it’s as easy to unmask the Dr Dooms of this world as it is to find funny cat videos, great live music recordings and even the odd over-medicated golf pro on his way home from…what…night putting?

Always check these things out for yourself.

Then find someone whose long-term track record is sound, and take their advice.

Because after all, it’s your money we’re talking about here.

Alan Steel, Chairman, Alan Steel Asset Management



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