Swedroe: Forecasters Not Held Accountable

May 22, 2017

The Broken Clock
Dent achieved fame and “guru” status with the successful forecast of a booming market he predicted in his December 1993 book “Great Boom Ahead: Your Comprehensive Guide to Personal and Business Profit in the New Era of Prosperity.” But as the expression goes, “even a broken clock is right twice a day.”

In October 1999, Dent’s best-seller “The Roaring 2000s: Building the Wealth and Lifestyle You Desire in the Greatest Boom in History” was published. Dent predicted the Dow might reach as high as 35,000 within the next decade. Of course, that 10-year period is now known as the “lost decade,” with the Dow closing at 10,428, lower than where it began the decade, and only about 25,000 points below Dent’s forecast of 35,000. And the Dow is still about 14,000 points below 35,000.

In January 2006, his book “The Next Great Bubble Boom: How to Profit from the Greatest Boom in History: 2006‒2010” was published. Once again, it would have been hard for Dent to have gotten this one more wrong, as, not long after publication, we experienced the worst bear market since the 1930s.

It is virtually impossible for Dent to have been more wrong with his last several forecasts. Which begs the question: Why would CNBC, or anyone else in the financial media, provide Harry Dent with any credibility by giving his forecasts an audience? The answer is simple: Scary headlines attract attention.

One can only imagine how much damage was done to their portfolios by investors who followed Harry Dent’s advice. CNBC’s listeners would have been better served by heeding the advice of Warren Buffett: “We have long felt that the only value of stock forecasters is to make fortune-tellers look good.”

The next time you’re tempted to act upon some guru’s forecast, remember Buffett’s advice and the tale of Harry Dent.

Larry Swedroe is the director of research for The BAM Alliance, a community of more than 140 independent registered investment advisors throughout the country.

 

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