‘Analysts say’: It’s the no-more-gaps of journalese. The dignifying of rent-a-quotes with the title of ‘analyst’ is all-purpose cover-up for the passing off of idle conjecture and sheer guesswork as the carefully though out prognostications of the prescient.
Financial media is full of it. Up against deadline and desperate to find facts to fit the premise snatched from the ether by an editor in search of an easy splash, journalists will find “analysts” who will say anything to fit the purposes of the story.
So at the start of 2013 when the periodic US debt ceiling circus was just pulling back from the brink again, the AFR helpfully found “analysts” to predict “no end to the volatility that has gripped markets over the New Year period, posing dilemmas for investors wondering how to invest in 2013”.
A year later and the venerable financial paper is at it again, quoting “experts” about why “2014 will be different for investors”. Golly. You mean not the same as last year? The year the US market hit record highs and the year Japan had its best gains since 1972? Well, thanks for that.
But let’s not pick on the AFR. All the newspapers are prone to selling cheap financial forecasts as take-it-to-the-bank prophecies. Take The Australian, who lined up the rent-a-quotes in January to tell us the Aussie bank stocks were likely over-valued and the S&P/ASX 200 would slump back to 4200.
Nearly a year later, the financials index (which includes the banks) is up nearly 20% and the overall market barometer is at 5100. But this is an old, old story.
Back in early 2008, Fairfax surveyed 28 “leading economists” from the finance sector, business and academia and asked them their 12-month outlook for the Australian dollar, the cash rate and the Australian share market. The median forecast was for the currency to rise to US90c from 88c, the cash rate to rise to 7.5% from 6.75% and the ASX 200 to rise by 8%. As it turned out, the $A fell to US70c, the cash rate fell to 4.25% and the share market crashed by 41%.
Fair enough. No-one saw Lehman coming. So what did they forecast the next year? Having been bullish when they should have been bearish, they were chastened. So the 2009 forecasts were flat for the $A at around 70c, a decline in the cash rate to 3% and a flat share market. A year later, the currency had risen 30% to US90c, the cash rate ROSE to 3.7% and the share market jumped 30%.
And remember, we are talking here about the “leading” economists. One can imagine what the “lagging” ones thought.
The financial media lives on the myth that there are people out there who can see the future. And that despite these wonderful gifts, they choose to slave away in bucket-shop brokerages. When a new theme is required (“time to pick stocks”), the media finds the talking heads to fit.
Meanwhile, the mythical “mums and dads” are asked to swallow as “news” what is essentially worthless speculation and guesswork. The newspapers are full of this stuff because it’s cheap and yesterday’s news won’t sell editions anymore.
My advice? Don’t even bother reading it as anything else than entertainment. Or get the Turf Digest.
See also: Barry Ritholtz: ‘Why Do Forecasters Keep Forecasting?’ | The Big Picture