2012 – A Bad Year for Pundits….

2012 was another bad year for Wall Street’s pundits.  This piece in yesterday’s WSJ highlighted some of the pitfalls involved in making broad market prognostications and not having to back those comments up with, well, anything at all:

Neither Mr. Rogers nor Mr. Cramer should feel singled out. The business of market punditry is fraught with potholes.

Of the 65 market “gurus” tracked during the last few years by CXO Advisory Group, the median accuracy for market calls is 47%. If that sounds low, or you wonder about the quality of the pundit, consider that the list includes such well-known names as Bill Fleckenstein (37%), Jeremy Grantham (48%), Bill Gross (46%) and Louis Navellier (60%).”

What we need in the investment business is fewer people with opinions and more people with proven track records that validate their supposedly superior understanding of what’s going to happen and why.

Cullen Roche

Mr. Roche is the Founder of Orcam Financial Group, LLC. Orcam is a financial services firm offering research, private advisory, institutional consulting and educational services.

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  • GLG34

    Cullen, where’s your track record?

  • http://www.orcamgroup.com Cullen Roche

    You’d have to do some sleuthing for that. My personal returns (which include my partnership) reflect a 16% compound rate of return over the last 7 years with very high risk adjusted returns. And never a negative year. Of course, I don’t run the fund any longer, but I’ll get back in the game at some point. Probably in a much more public and transparent way that is consistent with the more retail friendly business I’ve designed with Orcam. Obviously, past performance doesn’t mean much, but readers need to decide who they listen to based on whether they actually think so-called experts can correctly connect all the dots. So you guys are the final judges on whether you listen to someone or not.

  • perpetual neophyte

    It’s not convenient to access, but Cullen’s record – in some ways – is this blog. He’s made a number of real-time calls and most seemed pretty good.

    I think a big difference is that he acknowledges that making a correct directional call a quarter out is hard enough but trying to put specific numbers on events a year out (like a 2013 year-end S&P number) is a fool’s errand. He’s made calls on major risks (like silver just before a big drop in 2011, AAPL in late February 2012), directional calls on equities, macro calls on events like the Eurozone moving towards fiscal union in addition to monetary union and others – if my memory serves.

    There have also been some that were wrong or potentially early. For example, AAPL went up another ~30% after Cullen’s post in late February (although it’s now about 4% lower than when he wrote about it).

  • SS

    The real value is in Cullen’s understanding of the way the system works. I don’t value his work because I depend on him for market calls. I value his work because he helps me from making stupid mistakes. Like believing in hyperinflation because I misunderstood the impacts of QE or selling government bonds because I thought interest rates would go higher. Cullen has helped me become a better risk manager through a better understanding.

  • Mr. Market

    Fleckenstein predicts stagflation for the next year(s). That’s a minus point for him. We’re going back to deflation.

  • Boston Larry

    I concur with your view that Cullen has made some very good calls in this blog. Now that he is involved in Orcam, there will be fewer (if any) calls of that nature, but overall Cullen has done quite well.
    Thank you, Cullen! And good luck with Orcam!

  • Boston Larry

    CXO Advisory is not being fair to Bill Gross. He is out there with the media making so many calls that he is bound to get many of those calls ‘wrong’, but those are open to interpretation and timeframes. A much better way to judge Bill Gross is by the performance of his PIMCO Total Return fund. 5 yrs 8.3% annualized, 3 yrs 7.4% and the latest one year 10.9%. Not shabby at all for a low-volatility bond fund! And his new BOND etf is also doing quite well in its first year.

  • http://Macronomy.blogspot.com Martin
  • LVG

    Is Gross good or lucky? According to Morningstar the flagship PIMCO funds has returned 7.25% while the 10 year treasury returned 6.8% over the same period. After you account for taxes and free the Total Return fund has definitely underperformed the index.

  • LVG

    taxes and fees. Sorry. Cullen, edit button, please?

  • Vince

    Everybody has a batting average. It’s amazing that baseball pláyers are right 3 out of 10 times they go up to the plate and they earn 10 to 20 million a year. If we are right that amount of times we would be on FINRA’S hit list. We need at least 7 out of 10. What are we worth Cullen?

  • ducksoup

    ever tried hitting a 90+ mph fastball? one that’s also tailing and hisses at you as it passes? Mix in a sinking change-up plus a hard slider or or sharp curve all with pin point accuracy and you will begin to understand why a 300+ hitter earns much more than one who doesn’t. Oh, and don’t forget, that 90+ smoke can be aimed at your head as well.

  • skateman

    Magnitude matters here, and that’s totally being lost in this discussion. Being “right” 9 out of 10 times doesn’t mean much if the magnitude of your loss on the tenth time wipes out the other nine gains and then some. Conversely, being right one of ten times is fine if the nine losses are minor and the one gain is a ten bagger.

  • Hangemhi

    Don’t forget the skill of the defenders. I pitch in an old man’s amateur league and will walk away from a game feeling pretty good about my performance only to check the stats and realize I gave up 14 hits…. then start recalling the infield grounders, broken bat fisters, misjudged fly balls. Watch a major league game and it is full of line drive outs, balls caught at the wall, etc. Against any other defenders they’d have far higher averages.

  • ducksoup

    Awesome! You still play? Good for you!

  • Vince

    Ducksoup -Yes I did hit a baseball at 90 mph. I played on a collegiate level if not for injury I would have possibly made it. That was my analogy because we are underpaid compared to a baseball player. I still play in a 40 plus league . As far as investing thre are no grandslams out in this economy so I swing for singles and I don’t hide in the dugout. Ever heard of he 17 year lean and fat cycle? Track back 1931 to 1948 -lean. 1948 to 1965 – fat cycle. 1965. – 1982 lean. 1982 to 1999 best bull market in history. 2000 to now its very lean. Go look at your Charts on the S&P my numbers are right. Make your money and move on folks. A lean cycle we are in folks. All you old fogeys are stuck in the 82 to 99 cycle it’s not here yet perhaps after Obama’s second term. Happy New Year!! ,