Wall Street gurus nd predictions game getting ha...

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Wall Street gurus find predictions game getting harder
Reuters2hours20minutesago

ByJosephA.GiannoneandJessicaToonkel NEWYORK(Reuters)-Witheverynewyearcomeanewroundofboldpredictionsforfinancialmarkets. BillGross,themanageroftheworld'slargestbondfund,kickedofftheyearcallingthecurrentmarket"paranormal."Heforecasta2012 characterizedby"creditandzero-boundinterestraterisk." Blackstone(NYSE:BX-News)ViceChairmanByronWien,amongthesecuritiesindustry'sbestknownprognosticators,onTuesday unveiledhislatestcropof10"surprises"forthecomingyear.BlackRock(NYSE:BLK-News)ViceChairmanBobDollisbullishon stocks,whileonewell-knownforecasterevenwavedthesurrenderflag. Amongsomepredictions:Dollforeseesdouble-digitU.S.stockreturns,whileWienseesbenchmarkoilpricesplungingto$65abarrel. Inthepast--beforeU.S.housingpricesfellandkeptfallingforfirsttimesincetheDepressionorthefutureofEurozonewasatrisk-theireducatedguesseshadagoodchanceofbeingright. Butthesedays,marketvolatilityisthenormandfar-flungpoliticaleventscansendU.S.marketsintoatailspin.Skepticscontenditis hardtopredictwhattheworldwilllookliketomorrow,letalone12monthsfromnow. IndeedBirinyiAssociates'LaszloBirinyi,whosestockmarketforecastswerewidelyfollowed,toldclientsthismonththathewouldnot bemakingpredictionsthisyear. "Therearetoomanyvariableswhicharebeyondourcomprehension,"hewroteinhisJanuaryclientnewsletter. EvenWienandDollacknowledgethisannualexercisehasgrownmoredifficultinrecentyears,asdebtcrises,marketvolatilityand politicalupheavalthrowWallStreet'sbest-knownseersforaloop. "Theuncertaintyassociatedwithemergingmarketsgrowth,upcomingelectionsandtheEuropeandebtsituationmaketheforecasting exerciseespeciallyprecarious,"Dollwroteinhislatestoutlook. Wien,whoservedasU.S.strategistatMorganStanleyfor21yearsbeforemovingtoBlackstone,andDoll,whowaspresidentofMerrill LynchInvestmentManagementbeforeitmergedintoBlackRock,havemadetheirannualpredictionsawidelyanticipatedeventon WallStreet. Sohaveothers,likeGoldmanSachsAssetManagement'sJamesO'NeillandformerMerrillLynchstrategistRichardBernstein,who nowrunsaself-namedinvestmentmanagementfirm. Butdespitetheirexperienceandpedigrees,WallStreetgurusarewrongasoftenastheyareright. CXOAdvisoryGroupLLC,aresearchfirmthattracksmorethan60market"gurus,"calculatedtheaverageforecasterisaccurateonly 48percentofthetime--roughlythesameoddsasacointoss. "Youmightfindtheminterestingforotherreasons,butIwouldn'tputmuchstockintheirpredictions,"CXOAdvisorschiefexecutive SteveLeComptesaid. TheFederalReserveBankofPhiladelphia'sLivingstonSurvey,whichsummarizeseconomistforecasts,camewithinsevenpointsofthe year-endcloseoftheS&P500onceinthepastsixyears--essentiallyspoton. Butithasalsobeenoffbymorethan60pointsthreetimesand,in2008,whenthebankingsystemnearlycollapsed,itwasoffby147

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Wall Street gurus nd predictions game getting ha...

http://nance.yahoo.com/news/wall-street-gurus-pr...

points,or9percent,fromtheactualclose. Lastyearthesurveypredictedacloseof1298.5points,whichwas41points,or3percenthigher,thantheactualclose.TheS&P500was flatfortheyear. "Ithinkforecastinghasalwaysbeenhard,butthemarket'svolatilityhasmadeitabitharder,"saidTomStark,whooverseesthePhilly Fedsurvey. WienlastweektoldReutersthatovertheyearshisforecastshavepannedoutabouthalfthetime.Lately,though,Wienhasbeenwrong moreoften:in2010,onlytwoandahalfofhis10annualpredictionscametrue. HerightlysaidPresidentObamawouldendorselegislationfavoringnuclearenergyandthatfinancialservicesregulatoryreformwould besofteronWallStreetthanoriginallyfeared. "Seculartrendsaremuchmorefragilethantheyusedtobe,andthathasmadeforecastingmuchmoredifficult,"saidWien, "WhowouldhavepredictedtheArabSpring?Thattookeveryonebysurprise,"hesaid,referringtoawaveofproteststhattoppledrulers inAfricaandtheMiddleEastlastyear. Wienwasfivefor10inhis2011predictions,includingfourpredictionsthatwerepartiallycorrect. Forexample,hepredictedthatthepriceofcornwouldreach$8.00,whilewheatandsoybeanswouldhit$10.00and$16.00respectively. Whilecorndidhitthe$8.00markduringtheyear,soybeansandwheatdidnotreachsuchlevelsandthusWiengothalfthatprediction correct.Wien'spredictionsfor2012includehisviewthatU.S.companyearningswillpushtheS&P500up11percent,Syria'sBashar al-Assadwilllosepower,andthattheU.S.Congresswillfinallycometogetherandtacklethedeficit. Theseforecastsarenotablueprintforinvestors,Wiensaid,but"aredesignedtogetpeoplethinkingaboutsomeissuestheymightnotbe thinkingabout." DollpredictstheEuropeandebtcrisiswillbegintoease,thattheU.S.economywillmuddlethroughandthatU.S.Treasuryrateswill rebound. Dollsaidhehasbeenfairlyaccuratemostyears,includingsevenrightoutof10in2010.Heaccuratelypredicted,forexample,thatU.S. economicgrowthwouldexceed3percent. For2011,Dollpredictedacceleratingeconomicgrowth,double-digitstockgrowth,3millionnewjobsandanall-timehighforcorporate earnings.Whilefourth-quarterresultsarepending,thecompaniesintheS&P500isonpacetosetanewhighinearnings. ButhisS&P500forecastwastoooptimisticby100points,growthslowedin2011andbyNovemberonly1.45millionnewjobshadbeen created. CXOAdvisors,whichgivesDollanabove-averageaccuracyratingof54percent,saybecausehispredictionsfocusonbroadtrendsbut arelightonspecifics"itisrelativelydifficulttoassesstheaccuracyofMr.Doll'smarketprojectionsbecauseofconditionalitiesand vagueness,"thefirmsaid. (EditingbyJenniferMerrittandWaldenSiew)

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