Bernstein on Forecasting

Bernstein wrote an editorial in the Spring 1996 Journal of Portfolio Management on forecasting that was a classic. Titled, "Fearless Forecasters, or Fearless Forecast Consumers."

After highlighting the ridiculousness of forecasting he drew the following conclusions:

(1) The question is not whether wildly wrong forecasts will happen, but what we do about the high probability that wildly wrong forecasts will happen.

(2) We should study expert forecasts as evidence of the state of expectations, but not as any kind of measure of what the future holds in store.

(3) We should concoct scenario forecasts because they force us to consider wide changes and even discontinuities.

(4) We should put more effort into managing risks and considering the consequences of being wrong.


He ends with, "pretending to believe that forecasts are going to be right may be the greatest risk of all."

Hold Fast...Then Fade The Fading Seasonals

I am inclined to hold through to some ambiguous point in the first or second quarter 2013. I think the momentum and the seasonals are going to work in that favor. But I suspect resolution to the Fiscal Cliff and a burst of levity due to new year optimism will be worth fading.

It seems to me that the accumulation of obliviousness (classic market action - climbing the wall of worry) will peak and give way at some point to the weight of cumulative fears.

2012 has been a good year for the market. I don't think 2013 will be as good.