JOHN Maynard Keynes once observed: “men of self-confessed financial wisdom are wonderfully consistent, especially in their mistakes.” When the whiz economist was bursar of King’s College, Cambridge, he made it the richest academic institution in the land by studying The Financial Times for 10 minutes each morning.
No such thing as analysts and strategists back in those days. But are we better off now? The Masters, and increasingly Mistresses, of the Universe who could add billions of dollars to the value of markets with a single pithy prediction, have been exposed as charlatans. It turns out investors might as well as have consulted gypsy fortune tellers in carnival sideshows.
The soothsayers on Wall Street have so much egg on their faces that they resemble nothing less than ambulatory omelettes. The High Priestess of the equity cult, Abby Joseph Cohen, said the Dow Jones Index would finish last year at 12,600. It didn’t. It closed at 10,876 and has since visited 9,900. We can all make a mistake. But we are not paid more than US$10 million a year to get it right like Ms Cohen of Goldman Sachs.
More recently, the strategists were all so busy searching for their “bottoms” that they missed the recent big upturn in US stocks — which could prove a suckers’ rally.
America is, of course, a most litigious society. A New York doctor is suing Merrill Lynch analyst Henry Blodget and his firm for what he claims was dud advice.
The furious physician says thousands of shares in an online company called Infospace were stuffed up his nose by Blodget’s buy recommendations. He lost 96 per cent of his money.
No chance of anyone getting sued here, although the bloke who tipped Melbourne IT shares at $17 should be made to eat them at 92 cents.
