Being Right or Making Money, 3rd Edition

CHAPTER 1 Being Right or Making Money

NED DAVIS

Bad News about Forecasting (Being Right)

Later in this book there are several chapters about factors—including a potential cyclical bear market, demographics, and the U.S. energy renaissance—that could be game changers, and might help forecast the future. I hope you will find the perspectives useful, even though after studying forecasting for over 40 years I realize I do not always know what the market is going to do.

You may have heard of the Texan who had all the money in the world but who had an inferiority complex because he felt he wasn't very bright. When he heard about a brilliant doctor who was offering brain transplants, he immediately consulted him to find out if it were true and how much it would cost. The doctor told him it was indeed true that he could boost intelligence quotient (IQ) levels. The doctor had three types of brains in inventory: lawyer brains for $5 an ounce, doctor brains at $10 an ounce, and stock-market guru brains for $250 per ounce. The Texan asked, “Why in the world are the stock-market guru brains so much more expensive or valuable than those of doctors or lawyers?” And the doctor replied, “Do you have any idea how many gurus it takes to get an ounce of brain?”

People laugh at that joke because unfortunately there is a lot of truth to it. I don't know in what direction the markets will go, and neither does Janet Yellen or Barack Obama. Even George Soros, whose modest $1 billion take-home pay of ...