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THE MOST FAMOUS market-timing (mis)statement may be that of Irving Fisher, who—as a result—ultimately suffered a fate similar to that of President Herbert Hoover. Both men are inextricably linked to the Great Depression, despite a lifetime of achievement and their positive work to improve the lives of humans everywhere. Fisher, whose theories on capital, interest rates and lifecycle investing are still relied on by economists today, will likely continue to be remembered for his statement nine days before the 1929 market crash that, “Stocks have reached what looks like a permanently high plateau.”
He continued to double down on his statements that the market would head higher for many months, while instead it careened lower. Fisher went down with the ship, losing his entire fortune, which was worth more than $100 million in today’s money.
Want a more recent example of how hard it is to time the market? Alan Greenspan, at the time chair of the Federal Reserve, famously told the world in 1996 that the stock market was experiencing “irrational exuberance,” causing initial stock-market selling before shares resumed their march higher.
Greenspan came up with the speech in the bathtub (seriously). He gives himself a “C” for his forecast, which I consider generous. Being really early is the same as being really wrong. How much higher did stocks climb before the tech bubble burst more than three years later—at which point the market briefly dipped below Greenspan’s “irrational exuberance” level? Well, a picture is worth a thousand words.
What’s the best market-timing statement of all time? Consider the quote once offered by America’s then-wealthiest man, J.P. Morgan. When asked what the market would do that day, he purportedly responded, “It will fluctuate.”
Great post!
I was remembering something that happened to me and how it translates to media forecast publication and gurus telling us what the future holds.
I think it’s easy, when people start coming to you for your views, to step across the line and start making forecasts.
A lot of people succumb to temptation, but the wiser ones realize what is happening and step back from the abyss.
Many people confuse market timing with fundamental research. If you think a stock is undervalued based on your analysis of the corporate financials and the business model, you may wish to buy the stock. You’re not predicting the stock price will go up, but you are saying you are willing to own this company at this price.