Monday, March 02, 2009

Who pays analysts?

It seems there are plenty of analysts out there who are paid to make financial predictions. These guys go on CNBC or other shows and make their predictions with a completely straight face. However, if you look at their actual performance, their bosses might want their money back.

Here are a few of my favorites:

May 21, 2008 Arjun N. Murti, analyst at Goldman Sachs predicts oil to hit $200/barrel just before oil peaks at $147 then falls back to its current level of $40.23/barrel.

Jim Cramer predicts Bear Stearns is fine and healthy just before it goes completely under.

AIG (AIG) "could have huge gains in the second quarter." —Bijan Moazami, analyst, Friedman, Billings, Ramsey, May 9, 2008. AIG wound up losing $5 billion in that quarter and $25 billion in the next. It was taken over in September by the U.S. government, which will spend or lend $150 billion to keep it afloat.

So whats the point? Simple, just because someone makes a prediction, doesn't make it so. Most of these guys are making guesses. They don't know anymore than anyone else really. This isn't a complete insult to them since they know they are really frauds.

The big point is that you need to weigh all the advice, predictions and data then make as best a decision as you can. If you run your own business, focus on the little things and plan for the big things.

There are more at:

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