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Stop Pretending To Predict The Next Stock Market Crash

Written By Brian Hicks

Posted February 26, 2015

An Open Letter To Wolves In Pundits’ Clothing

You’ve all seen it before. Wannabe market pundits crying wolf time and time again. Don’t they remember what happened to the little boy in that fable? In some versions, only his livelihood was eaten by wolves. In others, he was devoured as well.

Those who throw around words like “crash” and “crisis” with conviction deserve our disdain shortly followed by our disregard.

Confidently explicit in their commentary, they employ sensational headlines and morbid phrases like “The Countdown Begins” and “Dead Ahead”, which tells you where their intentions truly are.

That kind of language is reminiscent of marketing tactics used to promote the coming of other fictional events, like summer blockbusters that have taglines such as “The End Begins,” etc.

If these fortune tellers really knew when the next crash was coming, they certainly wouldn’t be writing about it in CNBC, Motley Fool, Contra Corner, or MarketWatch. They’d quit their day jobs and quietly get to shorting stocks. I know that’s what I would do.

Even the world’s most successful investors admit how difficult it is to accurately predict market behavior, but none of these people are the world’s most successful investors. They type up copy to put bread on their tables.

And what’s their best-case scenario anyway? They know that a large part of the market is driven by investor attitudes and a fair share of big market moves are self-fulfilling prophecies.

But… at least they’re consistent. Once a crash finally does arrive, their cries will ring out from soapboxes everywhere claiming that they saw it coming. But they also “saw” it coming the year before it came, and the year before that, and the year before that.

(Read: I don’t know what I’m doing. I’m making this up as I’m going along. I got lucky.)

A “crash” is caused by the emergence of new information, information that most will be oblivious to until it’s too late. Markets price the future, not the present.

So those who falsely yell “fire” in a packed theater deserve to be crushed in the ensuing stampede.

Dear fear-mongering charlatans, kindly stay your yammering. Go buy a lottery ticket instead.