Market Strategists - WTF?!

Discussion in 'Trading' started by garfangle, Jul 21, 2003.

  1. I've always wanted to know how useful market strategists (think Abby Cohen) are aside from chumming with institutional clients. From what the public sees, they are mainly given a public forum in magazines and TV to make yearly calls on how the stock market's broad averages will perform and the interest rate. Yet, I am sure no serious money manager would take their advice as a trading signal at a specific time, yet to actually lock in a trade for a year.

    Most strategists are either former analysts or fund managers, so at least they know the business, but I cannot see why companies would pay these supposed seers millions of dollars for these predictions. So, of course, I presume their main role are as salesmen, to get their firms hired by institutional clients to manage money/get investment banking. However, by putting out these annual roundups of predictions on the direction of the market, they can often confuse the general public (though I assume no one here :D).

    For example, when Cohen (not to necessarily pick on her) kept predicting that the market will rise over the previous year as she has done so during the bear market (when it was obvious by the end of 2000), yet still has her job at Goldman, this should outrage the average investor who may have needlessly adhered to her advice as a top strategist (One should not be paid as well as one is if you are only correct during bull markets). She should not be above the common analyst like Blodget or Meeker.

    Remember that for the most part the losses incurred by investors were a result of professional selling to naive buy-and-holders (see Motley Fool).

    I am not saying that strategists CAN predict the future, but their role as oracles should be severely curtailed. Or else they should disclose their actual role as fee seeking salemen.
  2. dbphoenix


    One could also say that the losses incurred by investors were a result of naive buying from professional sellers. Nobody put a gun to their heads. As Peter Lynch once wrote, people put more thought into the purchase of a refrigerator than they do a stock. I can't see that that's changed much.
  3. JT47319


    -Sy Harding's 'Being Street Smart'
  4. Though, not to excuse morbid stupidity, when a market "expert" like these strategists say today's a ripe time to buy (and hold), why should not the public believe? After all these are the guys with MBAs, CFAs, CTAs, and PhDs who have spent their career as finance professionals.

    If you do not know, just say so, and then the investor can move on. Don't "lie" that you can predict something when what you are actually doing is guessing.

    Just follow these words when called upon to make a market pronouncement: "I really have no idea what the market will do a year from now, but in any case I'd like my firm to manage your money."
  5. Well said.