Financial analyst Robert Prechter is in the headlines, this time for another look at his 2003 predictions of financial apocalypse. You’d think I’d see eye-to-eye with the guy. He’s pessimistic on the economy and so am I.
The difference is that he’s a permabear who always thinks the world’s about to end. He’s been pessimistic since 2003, and most of the horrible thing’s he’s been predicting have yet to pass. So sure, he may not have gotten killed in the end of 2008 meltdown, but he didn’t have a run up, either.
I found this link a few months ago detailing Prechter’s terrible investment record:
Actually, Prechter has been making predictions for many years through his investment newsletter, Elliott Wave Financial Forecast. Newsletter tracker Mark Hulbert has been documenting Prechter’s investment trading predictions and picks since 1985 so he now has a nearly 25 year long track record which can tell us whether you should trade on his predictions or not. Here’s how Prechter’s trading advice has done from 1/1/85 through 5/31/09 versus the broad U.S. stock market average (Wilshire 5000 index) according to Hulbert’s analysis:
- Wilshire 5000 Index + 9.7 percent
- Prechter’s Trading Advice -15.4 percent
- Wilshire 5000 Index + 857.1 percent
- Prechter’s Trading Advice – 98.3 percent
$100,000 Invested (1/1/85-5/31/09):
- Wilshire 5000 Index $957,100
- Prechter’s Trading Advice $1,700
It’s pretty common for investment firms, funds, and pundits to underperform market indeces such as the S&P 500 and Wilshire 5000. Prechter didn’t just under-perform the indeces – his advice would have virtually wiped out your entire investment. Yet he’s constantly quoted in the press and can sell books and seminars. Amazing.
And from Mark Hulbert himself:
The last time that [Prechter's] newsletter recommended that traders be long stocks was in 1997, some 12 years ago. In fact, during the bull market of the 1990s, traders following his advice spent most of the time short the market or in cash.
This helps to explain why the newsletter’s timing advice for traders is in last place for performance over the last 20 years among all stock market timing strategies tracked by the Hulbert Financial Digest.