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Only time will tell. Yes, that’s what we predict.

Testy Business Copy Editor Phillip Blanchard

The defenestration of Vikram S. Pandit from the corner office at Citigroup might just be a turning point for shareholders of this great big beleaguered bank. What remains to be seen, however, is whether the change will also protect American taxpayers from future bailouts. (New York Times)

Only time will tell how much damage has been done to the Foxconn factory, the Apple brand or its supply chain. (MarketWatch)

Shen said global conditions were still difficult and uncertain. (Associated Press)

Carnac the Magnificent

Johnny Carson, as the psychic character Carnac the Magnificent.

The people who sell stocks, and the people who write about them, continue to be frustrated by their inability to predict the future with accuracy. This isn’t going to change.

Booms turn to busts. Profits rise and fall. We all “know” that, but we really don’t.  We know nothing. It would be nice to accept that and move on, but there is no reason to believe (or disbelieve) that anyone will.

“It is almost impossible to predict future price movements in financial markets using historical data,” writes Roberto Lanzillotti, whoever he is. Roberto is wrong. It is impossible, period. It might be interesting to look at what happened over time, but if there was a way to know what will happen next week, we’d all be out of business.

“OK, we get it,” I hear you cry.  I can’t be sure that you do. The folly of prediction is built into the business. We all want to be the ones who call it right.

The government encourages this behavior. “The Company and its representatives may, from time to time, make written or verbal forward-looking statements. Those statements relate to developments, results, conditions, or other events the Company expects or anticipates will occur in the future,” the Securities and Exchange Commission says. At least the SEC goes on to provide a long list of the various things that cannot be predicted, which is everything.

Here’s what we can do to stop this madness:

When a writer prefaces a prediction with something like “if history is any guide,” get rid of it.  History can inform and inspire, but it cannot predict. Nothing can.

If someone is quoted as saying what will happen next, point out after the quote that the future has been, is and always will be unknown.  That will start looking pretty stupid after the second time you do it, which will lead you to just drop the predictions.

Be aware of the very fine line between “outlook” and “prediction.” The line is often crossed.

– – –

Stock market prices plunged in a tumultuous wave of selling yesterday, giving Wall Street its worst day in history and raising fears of a recession. (New York Times)

The stock market crashed yesterday. (Wall Street Journal)

Last week was the 25th anniversary of the Oct. 19, 1987 stock-market crash.  Because we love anniversaries, there were plenty of stories to mark the occasion. There’s nothing  to add here, except to observe that the simplest ledes are always the best.


In Economy, Featured, Phillip Blanchard.

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