Why investors need to ignore futile investment forecasts

Martin Pelletier: Many experts, including energy fund managers, made their own predictions, touting the lack of relevance of polling, that there would be little chance of an NDP win.

It\’s been a fascinating past fourteen days with the New Democratic Party winning the Alberta election, the Calgary Flames getting eliminated in the playoffs and I ruptured my Calf msucles at a father-son pickup the game of basketball.

The one thing the 3 events have in common is that Never imagined any of them would happen.

Perhaps there is a valuable lesson here in that forecasting is really a futile exercise that only provides a temporary, but quickly fleeting sense of comfort that everything is going to be peaches and cream much more reality it sometimes dishes out a plate of liver and onions.

That said, forecasting goes on all the time, especially when it comes to investing. There is no shortage of so-called experts predicting from future earnings to the direction of equities, bonds and markets.

The problem is that the experts are terrible at it.

For example, take a look at the largest, longest study of expert economic forecasts performed by Philip Tetlock, a professor in the Haas Business School in the University of California-Berkeley, and highlighted within the book The sun and rain of Investing by Charles Ellis.