The Cloudy Crystal Ball, Part 5

“The only way to make money with a (market timing) newsletter is by selling one.” - Malcolm Forbes.

Market-Timing Newsletters

No one can accurately predict the short term direction of the stock, bond, oil or any other market, but you can do quite well by charging money for those predictions. Many people buy newsletters that will help them to determine whether or not now is “a good time to invest.” Let me ask you, if you were able to do that, predict the markets accurately and consistently, would you share that extremely valuable information?

Yes, newsletter writers are very convincing, whether they quote economic reasons or technical factors based on the internal dynamics of the stock market. Yes, they use data and systems that you don’t have access to or wouldn’t understand unless you had taken classes to learn them. They talk about or refer to chart patterns, oscillation, On-Balance Volume, etc.

Oh, they speak with great conviction. And when they are wrong (and they are often wrong), they write convincingly why that happened the way it did. They may place the blame on their “system” or their (mis)interpretation of their system. Great stuff.

In fact, thousands of people subscribe to such predictive newsletters. There’s even a paid service that evaluates the newsletters for you, The Hulbert Financial Digest. As for a track record, many newsletters go out of business within a few years. Some will have success in the short term, maybe as a result of skilled, knowledgeable writers, but more likely, it’s just plain dumb luck.

One such prognosticator is the famous (or infamous, depending on your point of view) Joe Granville. I remember back in the 1980’s when his forecasts could literally move markets.

Here is a recent article from MarketWatch.com indicating that Granville had turned bullish, i.e. he expects stock prices to go up.

“How far could this rally carry? My first guess could take it up 800 points, but my most recent research is taking aim at the 12,000 Dow area.”

Wow. That’s wonderful. We’re all home free. Now, let’s all go out and buy stock.

But note his caveat, “Once a call has changed from bearish to bullish, it then invalidates all projections made when I was bearish. When I get a sell signal, then all my earlier projections will be back in force.”

Don’t you think you might get whiplash, if you try to follow his advice? And notice that he snail mails his newsletter. By the time you receive the newsletter in your mailbox, his opinions may have already changed!

Before you take any of this seriously, read what Wikipedia has to say about Joseph Granville.

Granville is probably best known for his bearish market calls during the 1970s, 1980s, and 1990s, when he claimed that the stock market was headed for imminent collapse. His overall track record, according to the Hulbert Financial Digest, is very poor.

And I am not picking on just Joe Granville. In my opinion, all newsletter writers are suspect. If they really could predict the market, why would they have to sell newsletters?