In A Visual History of Market Crash Predictions, Michael Johnston asks that “when wading through the predictions of financial doom and gloom,” that we keep one thing in mind: In a sense everyone is a salesperson.
For editors of personal finance magazines or websites and television producers that means offering investors information they just can’t do without. Yet, in many cases, the drive to produce a good read or an entertaining program can compromise the quality and usefulness of that information. What’s more, the focus can sometimes be overly negative.
As the producers of the evening news know, American has a penchant for “dirty laundry.” So, rather than lead with good news, bad news often grabs the headlines. That approach can be especially problematic when it comes to your money. If you believe, as many in the press would have it, that financial disaster lurks around the corner, you may not be investing a way that will enable you to reach your goals. Worse yet, you could pull out of the market all together at a time when depressed prices really present a buying opportunity.
In this visual history, Johnson highlights some of the more extreme, and ultimately incorrect proclamations of financial doom. Take Charles Nenner, a market analyst who previously worked for Goldman Sachs. He maintains that his “Nenner Cycle” system can predict major movements in the stock market. In fact, he claims it warned him of the 2008 crisis. In 2010 he stated, “I don’t expect the economy to pick up until 2020.” Of course, this prediction of a lost decade was incorrect. As Johnson notes, the Dow has added almost 8,000 points since Nenner’s prediction.
And in the summer of 2010, here’s Robert Prechter in the New York Times, “I’m saying: ‘Winter is coming. Buy a coat.’ Other people are advising people to stay naked. If I’m wrong, you’re not hurt. If they’re wrong, you’re dead. It’s pretty benign advice to opt for safety for a while.” Of course, by the end of the year, the Dow was up 2,000 points. Some winter.
Although these market watchers certainly claim to be deep into market analysis, all they can do is guess about the future — and with less success than your local weatherman. There are no market crystal balls. If you scroll through Johnson’s article, which offers pictures of tweets and telecasts to support his argument, it also becomes clear that some folks simply position themselves as perpetual doom and gloomers. That way, whenever there’s a blip in the market, they get the call to comment. Honestly, some of these proclamations seem so loosely based on fact that you have to figure the voices behind them are more interested in making noise to attract attention to themselves than they are in helping investors to succeed.