Bulls Face Responsibility For Their False Forecasts
Jim Cramer who made a $50,000 bet with trader Eric Bolling that financial stocks would outperform gold and oil, have now been forced to pay out that sum to Bolling as financial stocks have plummeted while gold and oil have soared. Cramer was in other words about as wrong as you could get.
Cramer, in a statement blames his loss on "Federal Reserve Chairman Ben Bernanke's failure to cut interest rates more aggressively."
There are serious problems with that loss. First of all, when making forecasts about investments, you're supposed to take monetary policy actions into account and failed predictions of monetary policy is as bad as other failed predictions to the extent it affects the outcome of your investment advice. Secondly, it is more than pathetic to claim that Bernanke didn't cut rates agressively. Indeed, as is shown in the video I posted on Thursday, Cramer had forecasted only 50 basis points in interest rate cuts, as compared to the actual cut of 100 basis points. Thirdly, if the Fed had cut even more that wouldn't have affected the outcome of Cramer's bet with Bollinger. The reason for this is that oil and gold usually get as much boost from rate cuts as financial stocks.
Another bull who is being reminded of his inaccurate forecasting is Don Luskin. Luskin in this video recommends people to buy stocks, which Peter Schiff comments by saying that "if you want to lose money, sure go ahead and do that", whereupon a fierce debate which apparently caused the two to develop hard feelings toward each other.
As we all know, anyone who followed Luskin's advice of buying stocks did in fact lose money, just as Schiff predicted. And also, Schiff is clearly being proven right in his assessment of the general state of the U.S. economy. Luskin here tries to divert attention from this by implying that Schiff is obsessed with this thing and by saying that global stock markets have performed lousy too. Whether Schiff is obsessed with getting the record straight about who was right depends on what you mean by obsessed, but let's say Schiff is no more obsessed about it than Luskin is about pointing out errors in Paul Krugman's forecast. And to the extent Schiff have recommended foreign stocks, Luskin is partially right that they have performed almost as bad as U.S. stocks. However, there have been a better investment alternative than stocks and that is commodities like gold and oil, which Schiff has been very bullish about.