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Huge Disparity Opens Between Year-End Stock Forecasts
Some readers are probably tired, by now, of hearing me insist on the futility of forecasting equity benchmarks.
Relatedly, I imagine not everyone is enamored with my view that to the extent projecting stock prices (and market outcomes in general) is a fool's errand, it's a reflection and a microcosm of human existence, itself a futile project that often entails making pointless forecasts subject to the vagaries of human behavior.
But, it's important to acknowledge reality: This is all a silly
In a comment on your post the other day I compared markets to a horse race: As Bad As It Gets? What to Expect From Earnings Season.
Indeed, it’s a silly parlor game. All we can do is make our best guess, based on some facts without knowing, for certain, the future. But, it’s engaging and challenging. Sometimes we lose. In most circumstances, if I play my cards right, so to speak, I’ve picked companies that treat me well. Not all of my picks, but most. And I come out ahead.
As I alluded to in As Bad As It Gets?…, geopolitical issues can be complicating. The UK is dealing with internal financial issues, but the international landscape (the Russia-Ukraine war) presents a challenge for British engagement. They have a history on the international stage, and participate to the extent they can. But this is not WWII, and today’s UK doesn’t have the same capacity.
It’s a different world for sure, and China and Russia are trying to change it further. The circumstance are the kind of thing that can lead to large, unwelcome surprises. If they go “ape,” and matters get out of hand, I’ll expect to say goodbye to any hope for the returns expected from my current investments.
H
Some might think you a bit too cynical for your views on the financial party we are all part of, but I am not among them. You are dead on in your assessment. I would add a side note. My training tells me stocks do represent an ownership interest in a actual firm. Indeed I taught that fact to my students for over forty years. But the truth is that stocks purchased on an exchange, while they seem to be represent some sort of promise from the company, carry no such weight. Stocks only have value in trade from persons we will never know. They are just tickets granting future permission to find a “greater fool” and dump our shares to those even sillier than us. If one buys stock and ends up with 50%+1 of the shares, one has a form of ownership worthy of at least some attention. Else, fagedaboudit. A few hundred shares, even, is bupkis. My biggest holding is several hundred shares of LLY, bought for a song long ago. Rather than a sense of ownership what I really feel is like I would feel holding a live grenade. Shares are only worth something if people who don’t own them (not the company) want to buy them. The company owes its owners absolutely nothing, ever, period. It makes no legal promises for money returns to anyone. Bonds are contracts with specific legal terms. They are debts that need to be paid. Stocks rely on the “kindness of strangers” (apologies to the late Tennessee Williams) for any returns a holder might receive. While boards of directors authorize any voluntary dividends, they are strangers all, (although I once held a bunch of WWW, one of whose board members had once been a childhood neighbor and later briefly my boss).