Swedroe: Grading The Forecasters

July 28, 2017

  •  James Dines, founder of The Dines Letter. According to his website, he is “truly a living legend … one of the most accurate and highly regarded investment analysts today.” His forecasting accuracy score was 50%. Not quite the stuff of which legends are made.
  • Ben Zacks, a co-founder of well-known Zacks Investment Research and senior portfolio manager at Zacks Investment Management. His score was 55%.
  • Bob Brinker, host of the widely syndicated MoneyTalk radio program and publisher of the Marketimer newsletter. His score was 46%.
  • Jeremy Grantham, co-founder and chief investment strategist of GMO, a global investment management firm. His score was 42%.
  • Dr. Marc Faber, publisher of the Gloom, Boom & Doom Report. His score was 39%.
  • Jim Cramer, host of CNBC’s Mad Money. His score was 37%, finishing in 50th place.
  • John Mauldin, well-known author. According to his website, “his individual investor-readers desperately need to know what his institutional money-manager clients and friends know about the specific investments available to help them succeed in challenging markets.” His score was just 36%.
  • Gary Shilling, Forbes columnist and president of A. Gary Shilling & Co. His score was just 34%.
  • Abby Joseph Cohen, recently retired from her position as president of Goldman Sachs’ Global Market Institute. Her score was just 34%.
  • Robert Prechter, president of Elliott Wave International, publisher of the Elliott Wave Theorist and the author of multiple books. He brought up the rear, with a score of just 17%.

Of course, there were a few forecasters with fairly good records. But only four of the 68 gurus posted scores at or above 70% (among them was David Dreman), and just 11 in total had scores above 60%.

Yet 18 forecasters had scores below 40% (versus just the 11 with scores above the 60% mark), and five had scores below 30% (compared with just four with scores above 70%). It’s also important to keep in mind that strategies based on forecasts have no costs, but implementing them does.


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