Forecasting

“Most of the people who have accumulated the greatest wealth in this business have done so not by predicting the future, but by buying companies at such attractive prices, thereby discounting the majority of the problems people fear.”

“I think that accounting is a very serious issue in a lot of companies. The need to make profits every quarter and to meet analysts’ estimates can be a debilitating force.”

“Extrapolating existing conditions too far into the future is likely to lead to disappointment. But as long as people continue to make this mistake, and as long as the market consensus reflects it, history will continue to repeat itself in Wall Street.”

“Investor anticipations, similar to the laws of economics, are shaped at the margin. That is why changes in earnings estimates follow, for the most part, changes in stock prices, and not vice versa as it should be.”

“Experience teaches us that earnings estimates, especially those of a longer-term nature, are not particularly reliable.”

“Most investors underestimate the stress of a high-risk portfolio on the way down.”

“Knowledge of the past is indispensable to understanding and managing the future.”

“It is more important to know what will happen than when it will happen, because it is impossible to forecast with precision the timing of critical events.”

“The word preferred does not add anything to the value of an issue. If a common stock has just as large earnings applicable to it and no greater deduction ahead of it, it must be more valuable than a similarly situated preferred — because the common stock is entitled to all future earnings and the preferred only to a restricted portion thereof.”

“Current earnings, future prospects, management, marketability are all factors more or less independent of assets which contribute their share to the intrinsic value.”

“I am skeptical about stock market forecasting by anybody, and particularly by bankers.”

“The trouble with market forecasting is not that it is done by unintelligent and unskillful people. Quite to the contrary, the trouble is that it is done by so many really expert people that their efforts constantly neutralize each other, and end up almost exactly in zero.”

“If we really knew what the future will bring that is all we would have to know; but since stock market people can only guess the future and since they have the embarrassing habit of guessing wrongly, it seems best not to lay too much stress upon forecasts.”

“The true measure of common stocks values, of course, is not found by reference to price movements alone, but by price in relation to earnings, dividends, future prospects and, to a small extent, asset values.”

“It is a safe prediction for me to make that, in future years as in the past, common stocks will advance too far and decline too far, and that investors, like speculators — and institutions, like individuals — will have their periods of enchantment and disenchantment with equities.”

“I think the future of equities will be roughly the same as their past; in particular, common stock purchases will prove satisfactory when made at appropriate price levels.”

“I insist that more damage has been done to stock values and to the future of equities from inside Wall Street than from outside Wall Street.”

“No prediction — whether of a repetition of past patterns or of a complete break with past patterns — can be proved in advance to be right.”

“The future, as I see it, is something to be protected against rather than to exploit.”

“The true measure of common stock values, of course, is not found by reference to price movements alone, but by price in relation to earnings, dividends, future prospects and, to a small extent, asset values.”

“Many mistakes have been made in buying growth stocks on the theory that the future will duplicate the past.”

“The market cycle of the future may prove to be surprisingly independent of the business cycle, and it may even exist if there is no business cycle — which is in itself quite an assumption, but not an entire impossibility.”

“When it comes to statements about the future in the economic realm, none of us have knowledge in the scientific sense of the term. What we have is opinions and surmises — let us hope, based upon adequate reflections and study.”

“I believe that the trend of stock equities will continue in the future as it has in the past — and that is irregularly upward, with some emphasis upon the adverb irregularly.”

“I think that the future of equity investment, when it is made at a reasonable price, is a promising one, and one that deserves the confidence of those interested in the investment field.”

“The broad pattern of market action in the past is the best guide to the future — but it is not an infallible guide.”

“Economic events rarely unfold in the way stock-market people forecast them.”

“My experience leads me to predict that the action of the market will govern the investor’s choice as to probable future growth rates, rather than vice-versa.”

“The security analyst can only give you certain hints as to what the solution is likely to be, certain indications of a range of value rather than a specific figure, and perhaps a diffident suggestion as to where within this range he believes the probabilities of the future will lie.”

“There are two principal mistakes that nearly all amateurs in the stock market make. The first is to have an inexact knowledge of the securities in which one is dealing, to know too little about a company’s management, its earnings, and prospects for future growth. The second mistake is to trade beyond one’s financial resources, to try to run up a fortune on a shoestring.”

“People invest in stocks for two opposite reasons — in hope and confidence in the future of an enterprise or in fear that the value of their capital will be lost through inflation.”

“The stock market registers the judgments of multitudes of buyers and sellers about the many factors which affect business — what business is like today; what it will be like in the future.”

“No one, not even the most experienced trader, economist or businessman can predict with certainty the course of the stock market.”

“Using the outlook for the economy to predict the direction of the stock market, which most appear to do, has it exactly backward. The stock market’s behavior will predict the economy’s future behavior.”

“Stocks are the long duration asset, and their level reflects people’s optimism about the future and their attitude toward risk.”

“What I believe will happen in financial markets and what ends up happening have no necessary relationship. The future is uncertain, and the returns investors earn will depend on the nexus of actions taken and how events unfold.”

“The market doesn’t lack for analysts and commentators who mine the data for patterns and declare how the future will look based on how past patterns evolved. I wish it was that easy.”

“As I often remind our analysts, 100% of the information you have about a company represents the past, and 100% of the value depends on the future.”

“As long-term investors, we position portfolios for the 95% of the time the economy is growing, not the unforecastable 5% when it is not.”

“For value investors, price is one thing, and value is another. When prices move against us, it usually means that the gap between price and value is growing, and our future expected rates of return are higher.”

“Economic numbers report the past, and corporations observe the present, while the market lives in the future.”

“One of the markers, in my opinion, of a high future return is where the worst rate of return has been during the preceding five or six years.”

“People often say there’s lots of uncertainty, but when was there ever certainty in the markets, the economy, or the future? I’m just trying to understand the present.”

“If you have a valuation discipline, then you know that stock prices change more rapidly than business value. You also know that rising stock prices mean lower future rates of return and falling stock prices mean higher rates of return.”

“Valuation is determined by the relation between a stock price and the present value of the free cash the business will generate over one’s forecast time horizon. The problem comes with assessing the future free cash flow. It is a highly subjective and uncertain exercise.”

“There is very little value added trying to predict where the market is going or guessing whether it’s overpriced or underpriced.”

“I figure that I want to swim as well as I can against the tides. I’m not trying to predict the tides.”

“Never underestimate the man who overestimates himself. These weird guys who overestimate themselves occasionally knock it right out of the park.”

“Momentum crashes are fast, violent, and predictable in hindsight.”

“One of the major differences between behavioral economics and standard economics is that, in standard economics, the individual agent is supposed to be driven or motivated by the utility of future wealth and discounted future wealth and present wealth. In behavioral economics, agents are supposed to be motivated by something else: gains and losses.”

“I think that we only get estimates of the distributions and that we can only be somewhat sure of the estimates. That makes the problems in the financial world much more difficult, I think, because you have these uncertainties in the distributions.”

“The principle of “managed” investment trusts is absolutely sound, granted only one premise. The premise is that there are somewhere people of such experience and insight that they can predict with some sort of accuracy the future behavior of securities.”

“The generally accepted theory is that financial markets tend towards equilibrium, and on the whole, discount the future correctly. I operate using a different theory, according to which financial markets cannot possibly discount the future correctly because they do not merely discount the future; they help to shape it.”

“Risk is when there are multiple possible future states and the probabilities of those different future states occurring are known.”

“Market prices of financial assets do not accurately reflect their fundamental value because they do not even aim to do so. Prices reflect market participants’ expectations of future market prices.”

“It is not forecasts that protect capital, but structure.”

“I like to steer the boat each day rather than plan ahead way into the future.”

“When most people think about the future, they ignore that the future is a distribution of possibilities.”

“I believe it’s hard to predict the future. It’s not that hard to predict the present. In other words, it’s not that hard to understand what’s going on today.”

“Extrapolation is usually right, but not valuable, and predictions of deviation from trends are potentially profitable but rarely right. So far, macro-economic forecasting doesn’t represent the path to superior investments.”

“Being “right” doesn’t lead to superior performance if the consensus forecast is also right.”

“Most of us have roughly the same ability to predict the future. The trouble is, being right as often as the average forecaster won’t produce superior results.”

“Extreme predictions are rarely right, but they’re the ones that make you big money.”

“Potentially profitable, nonconsensus forecasts are very hard to believe in and act on for the simple reason that they are so far from conventional wisdom.”

“Valuation is a terrible timing tool and a wonderful return predictor.”

“The future will surprise you — plan accordingly”

“Forecasting is useful only if it reminds you of your ignorance.”

“One can predict the course of a comet more easily than one can predict the course of Citigroup’s stock. The attractiveness, of course, is that you can make more money successfully predicting a stock than you can a comet.”

“We deceive ourselves when we believe that past stock market return patterns provide the bounds by which we can predict the future.”

“Forecasting is a notoriously underpaid profession, and extremely risky to boot, so I avoid it.”

“In speaking of future prospects it is often difficult to make the distinction clear between what one considers the most desirable in the public interest and what one reckons to be the most probable in the actual circumstances. For unfortunately the course of events which is the most desirable is not always the most probable!”

“Guessing at the future rate of interest is, in my opinion, one of the most puzzling problems in the world.”

“There will be bear markets about twice every 10 years and recessions about twice every 10 or 12 years but nobody has been able to predict them reliably. So the best thing to do is to buy when shares are thoroughly depressed and that means when other people are selling.”

“The influence on stock prices are so numerous and so complex that no person has ever been able to predict the trend of stock prices with consistent success.”

“A lifetime of investment research has taught me to become more and more humble about making predictions.”

“The investor’s edge is not forecasting, but endurance”

“Attempting to guess short-term swings in individual stocks, the stock market or the economy is not likely to produce consistently good results. Short-term developments are too unpredictable.”

“We don’t need to predict the future — we need to prepare for it.”

“Consistency of process matters more than precision of forecasts.”

“We don’t pay attention to quarterly earnings or consensus forecasts. That’s performance investing, not value investing.”

“Superior returns come from better expectations, not better forecasts.”

“Paradigm shifts are an inevitable result of forecast errors — the raw material from which paradigm shifts are fashioned.”

“Although expectations of the future are supposed to be the driving force in the capital markets, those expectations are almost totally dominated by memories of the past. Ideas, once accepted, die hard.”

“Volatility is often a symptom of risk but is not a risk in and of itself. Volatility obscures the future but does not necessarily determine the future.”

“Past corporate successes are only frail guides to future good fortune.”

“Financial markets are a kind of time machine that allows selling investors to compress the future into the present and buying investors to stretch the present into the future.”

“History shows us, over and over, that bull markets can go well beyond rational valuation levels as long as the outlook for future earnings is positive.”

“Equities are a claim on uncertain future earnings.”

“Our expectations of the future are not unbiased and do not reflect all available information.”

“We naturally fear the unknown, and the future is always unknown.”

“Survival as an investor over that famous long course depends from the very first on recognition that we do not know what is going to happen. We can speculate or calculate or estimate, but we can never be certain.”

“Even the most serious efforts to make predictions can end up so far from the mark as to be more dangerous than useless.”

“Markets are shaped by what I call “memory banks.” Experience shapes memory; memory shapes our view of the future.”

“You can’t forecast multiples.”

“When inflation is low, you feel that you know more about the future, and are much more willing to take risks.”

“Most human error is predictable”

“You never can predict the economy. You can’t predict the stock market.”

“I deal in facts, not forecasting the future.”

“Corrections are unpredictable. By selling stocks to avoid pain, you can miss the next gain.”

“Ultimately, to be an investor in stocks, you have to believe that American business has a decent future, as well as business worldwide, and that corporations will continue to increase their profits.”

“Every recession brings out the skeptics who doubt that we will ever come out of it, and who predict that we will soon fall into a depression, when new cars will sit unsold in the showrooms forever and houses will stand empty, and the country will go bankrupt.”

“There are economic facts and there’s economic predictions and economic predictions are a total waste.”

“I’ve found that when the market’s going down and you buy funds wisely, at some point in the future you will be happy.”

“No one can predict with any certainty which way the next 1,000 points will be. Market fluctuations, while no means comfortable, are normal.”

“I didn’t spend any time predicting the economy, or the stock market. I spent all my time looking at companies.”

“So the stock market will definitely have a correction. Everybody will say that it is the end of the world. I predict it. They will say the big one’s coming.”

“I’ve been fully invested at the start of all the major declines and I will be fully invested in the next one. I am not a market predictor, that’s for darn sure.”

“Even in good markets we have declines and trying to predict its direction over the near term is an exercise in futility.”

“It would be very useful to know what the market is going to do. But unfortunately, of all the market corrections that have ever come, no one has been able to predict them.”

“The stock market has a 100% record, in the last 50 years, of predicting upturns in the economy. It’s never been wrong. It’s less than 50-50 on a downturn.”

“One point movements may be likened to the ripples of the stock market, whose occurrence may be influenced by so great a multitude of factors that it is impossible to forecast them. Ten-point movements may perhaps be compared to waves.”

“The general state of business thus does not forecast the course of stock prices except in the apparently paradoxical fashion that great prosperity affords an advantageous time for selling stocks, extreme business depression an opportunity for purchase.”

“It is usually a much simpler matter to forecast a bull market than to call the turn at its end.”

“If we use prediction as the measure of a model, traditional finance makes precisely wrong predictions.”

“The stock market itself seems to be mainly driven by fashions and fads. However, when you look at individual stocks, it’s a different story, because individual stocks are much more diverse, and some of them can be predicted to perform well over the long run.”

“Faith in the future is as much motivated by confidence as it is a reflection of fear in acknowledging a mistake.”

“Internal rates of return and other mathematical formulas for real estate projections attempt to legitimize the presumption of predictable results.”

“The most significant factor influencing real estate’s future value is competition. One could argue that the higher the occupancy and the rates, the more likely this level of performance will not continue.”

“The line I draw in the sand is that if an asset has cash flow or the likelihood of cash flow in the near term and is not purely dependent on what a future buyer might pay, then it’s an investment. If an asset’s value is totally dependent on the amount a future buyer might pay, then its purchase is speculation.”

“Volatility is not risk. And historic volatility does not necessarily project future volatility.”

“It is crucial to have a strategy in place before problems hit, precisely because no one can accurately predict the future direction of the stock market or economy.”

“Any contrarian knows that just as a grim present is usually precursor to a better future, a rosy present may be precursor to a bleaker tomorrow.”

“In my view, predicting future private market value is like predicting future Dow Jones levels: It doesn’t make any sense at all.”

“Value to some extent is in the eye of the beholder. It is very hard to pin down what the value of a future set of cash flows from a business, be it cable TV or biotechnology, is going to be.”

““Growth stocks” can be defined as shares in business enterprises which have demonstrated favorable underlying long-term growth in earnings and which, after careful research study, give indications of continued secular growth in the future.”

“So many investors today focus on earnings, but I focus on assets and don’t try to predict next months’ earnings, which is a much more difficult approach to investing.”

“I make no attempt to forecast the general market — my efforts are devoted to finding undervalued securities.”

“Forecasts usually tell us more about the forecaster than of the future.”

“The fact that people will be full of greed, fear, or folly is predictable. The sequence is not predictable.”

“History does not tell you of future things happening.”

“I am certainly not going to predict what general business or the stock market are going to do in the next year or two since I don’t have the faintest idea.”