See, See Your Future

• Posted by Adam Warner
• on January 12th, 2010

We all know how the pundits do prognosticating in our biz. Every year they predict 8-10% returns, but warn that it’s a stock-pickers market.

Well not everybody I guess. Jordan Kahn of In The Money runs a poll every year. I always go for outliers not because I think it will necessarily happen, just because I want to win the poll. And hey, I came close, Jordan says I had SPX 1200. But not close enough.

This is the 6th year that I have been conducting an investor poll. There are numerous polls taken each year, where the Wall Street strategists make their predicitons for the year head, but I wanted to see how the group of portfolio managers and traders that I speak with on a regular basis stack up in terms of their outlooks.

In most of the years past, our pollsters have been fairly subdued in their forecasts. From 2005 – 2008, the average forecast for the group as a whole was for the market to rise in the low-to-mid single digits. Last year (2009) was the first time the group’s average forecast reached double-digits (+14%), although it still proved conservative.

Last year’s winner was the astute Rob Fraim, who forecast the S&P 500 would finish the year at 1111 (it closed at 1115). Rob win’s dinner at one of LA’s hippest establishments. All he has to do is come out to LA to collect. (Hope to see you soon).

Well, not getting out to L.A. any time soon anyway, so congrats to Rob.

I went outlier-high this year too, so we’ll see.

There’s clearly a key to football prognostication too. Take last year’s results, overestimate the impact of free agency gains and losses and returns from injury and voila, pick your order. Kottke studied just how good those calls were, and came away pretty unimpressed (hat tip Abnormal).

How accurate are all those preseason predictions about how the coming NFL season will unfold?

In an effort to find out, I collected a number of preseason “team power rankings” two days before the 2009 NFL regular season started in September. These ranking lists are compiled by columnists and pundits from media outlets like Sports Illustrated, Fox Sports, The Sporting News, and ESPN. In addition, I collected a fan-voted ranking from Yahoo Sports and the preseason Vegas odds to win the Super Bowl. As a baseline of sorts, I’ve also included the ranking for how the teams finished in the 2008 season.

Each team ranking from each list was compared to the final 2009 regular season standings (taken from this tentative 2010 draft order) by calculating the offset between the estimated rank to the team’s actual finish. For instance, ESPN put the Steelers in the #1 slot but they actually finished 15th in the league…so ESPN’s offset for the Steelers is 14. For each list, the offsets for all 32 teams were added up and divided by 32 to get the average number of places that the list was off by.

The winners were….CBS, Sporting News and THE USA Today with average offsets of 5.6.

There really wasn’t much difference between the offsets, or the actual picks for that matter. Everyone missed on the top end teams, they all had Steelers, Giants and Titans too high for example. The bottom teams were much closer, but that’s more an indication that pretty much the same teams were bad from 2008 to 2009. Basically everyone does the same thing, they see who’s good the year before, add or subtract based on the players/coaches in an out, and reach the same conclusions.

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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