Wall Street has never had a shortage of strong opinions. In a few hours of watching cable news, you are likely to hear financial pundits make dozens of predictions — many of them contradicting each other — about the future of the stock market.
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Such talk is entertaining, but taking these prognostications seriously and applying them to your portfolio can be disastrous. Don’t believe us? What follows are 11 predictions that blew up in the pundits’ faces, and burned the investors who listened to them. Don’t damage your own portfolio — learn to safely invest your money instead.
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1. Missing the 1929 Stock Market Crash by a Mile
Even though the most devastating stock market crash in American history happened almost a century ago, urban legends of investors leaping out of windows to their deaths still resonate. It all began on Oct. 24, 1929, as the market lost 11% of its value. Just seven days before, the famous economist Irving Fisher offered a prediction.
Pictured: New York Stock Exchange during the Crash of October 1929
Irving Fisher’s Prediction Miss
“Stock prices have reached what looks like a permanently high plateau,” Fisher said. “I do not feel there will be soon if ever a 50 or 60 point break from present levels, such as [bears] have predicted. I expect to see the stock market a good deal higher within a few months.”
Turns out that Fisher was famously — and dramatically — off the mark. “Though Fisher is regarded as one of the giants in investment history, his ability to forecast market activity was less than stellar,” said Robert R. Johnson, professor of finance at the Creighton University Heider College of Business.
2. Ravi Batra Predicting the Great Depression of 1990 That Never Was
As an economist, author and professor at Southern Methodist University in Dallas, Ravi Batra has made a name for himself critiquing capitalism and claiming that it can lead to inequality and political corruption. Batra put himself out on a limb with his 1987 tome “The Great Depression of 1990,” said Johnson.
Pictured: New York Stock Exchange in 1995 where Dow Jones Industrial Average closed at 4,852.67
Ravi Batra’s Award for His Incorrect Guess
“While his prediction didn’t come true, his book did reach No. 1 on The New York Times bestseller list,” Johnson said. “He has the distinction of being awarded the 1993 Ig Nobel Prize — a parody of the Nobel Prize — for his incredibly poor prediction.” That award also “honored” Batra’s sequel, “Surviving the Great Depression of 1990.”
3. Forecasting Dow 100,000 by 2020
Maybe investment strategist Charles W. Kadlec took Prince’s invitation to “party like it’s 1999” a bit too seriously because that’s the year this mega-bull made an outrageous forecast: The Dow Jones Industrial Average would hit 100,000 by 2020. It’s all there in “Dow 100,000: Fact or Fiction.” Unfortunately, things like the dot-com bubble burst and the Great Recession got in the way.
Pictured: Dow Jones Industrial Average price in 2009
Where Things Really Are in 2020
The Dow Jones Industrial Average has traded above 29,000 recently, but that’s far short of Kadlec’s prediction for where it would be by now. As one reviewer on Amazon, Michael Emmett Brady, said of the book: “The correct title for Kadlec’s supply-side nonsense is ‘Dow 100,000: Fiction.’”
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Pictured: Dow Jones Industrial Average price in 2020
4. Predicting Dow 36,000
Someone must’ve slipped something into the irrational exuberance punchbowl in 1999. The year after Kadlec’s call, Washington Post columnist James Glassman and economist Kevin Hassett published the first edition of “Dow 36,000.” That’s a lower target than 100,000, to be sure, as they predicted the Dow Jones Industrial Average would hit 36,000 within a few years. As Publishers Weekly put it, “The only thing missing from this half-time speech of an investment book is an exhortation to buy stocks for the Gipper.”
Pictured: New York Stock Exchange shows record close of Dow Jones Industrial Average in 1999
Why They Made This Bold Prediction
“The [authors’] main argument was that stocks and bonds should be treated as equally risky — and that when the market woke up and realized that, stock prices would soar,” Johnson said. Fast forward to 2020, and the Dow still has a long way to go. Understandably, “this bold call has dogged the authors,” Johnson said.
Pictured: Dow Jones industrial average closed over 29,000
5. SmartMoney’s Dumb Call on AOL
Singling out the worst financial call of all time is a challenge. “Outrageously erroneous financial predictions are so numerous that selecting the worst is an impossible task,” said Bruce D. Vandegrift, a wealth strategist and vice president of Chemical Bank in Grand Rapids, Michigan. But if you press him, Vandegrift has one no-brainer of a brainless pick.
“In December 1999, [the former] SmartMoney magazine, in its year-end predictions, named a number of dot-com stocks as sure winners for the future, and among their picks was AOL,” he said. It was right before the dot-com bubble burst, and enthusiasm was high on anything high-tech.
Pictured: AOL CEO Steve Case in 1999
What Happened After the Prediction
Then, in 2000, AOL entered into a disastrous merger with Time Warner. “AOL lost more than 70% of its stock value the year after,” Vandegrift said. SmartMoney’s dumb gaffe offers another reminder that tuning out predictions can help you avoid big investing mistakes.
Pictured: AOL CEO Steve Case with Time Warner CEO Gerald Levin
6. Failing To See the Enron Crash Ahead
Many investors got rolled with Enron stock, especially after Fortune magazine voted Enron “America’s Most Innovative Company” for six consecutive years, from 1996 to 2001. Yet that final year, Enron succumbed to the largest corporate scandal and flameout in history. The stock tumbled from $90 a share on Aug. 23, 2000, to 6.2 cents on Dec. 31, 2001 — a span of just 16 months.
How Many Analysts Got It Wrong
As late as September 2001, 16 analysts had buy ratings on Enron, Johnson said. “On Oct. 23, with the stock selling at around $20, Lehman Brothers analyst Richard Gross reiterated that Enron was a strong buy, and ‘the stock should recover sharply.’”
Gross and the other 15 analysts were not alone in giving bad investment advice. Among Wall Street analysts at the time, “there were no sell ratings,” according to Theodore F. Sterling’s book “The Enron Scandal.”
Pictured: Enron Field sign being removed from Astros ballpark
7. Making One of the Worst Google Predictions Ever
In 2004, Whitney Tilson gave bad investment advice that was the stock market equivalent of not just missing the boat, but the aircraft carrier. That year, Tilson predicted Google would be “disappointing” to investors, according to CNBC.
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Pictured: Google CEO Eric Schmidt with Larry Page and Sergey Brin
What You Lost If You Took the Advice
Everyone knows what happened to Google after that, but here’s a little context: If you took Tilson’s advice and unloaded your stock three years after its 2004 IPO, you’d have missed out on one of the greatest run-ups in history. Between 2004 and 2013, Google’s stock price skyrocketed by more than 900%.
8. Jim Cramer Failing To Go Bearish on Bear Stearns
When it comes to putting his neck on the line — and getting it chopped off a few times too often — Jim Cramer, the host of “Mad Money” on CNBC, arguably leads the pack. On March 11, 2008, Cramer responded to a viewer’s concern over Bear Stearns’ liquidity problem, recalled K.C. Ma, director of the Sarah George Investments Institute at Stetson University in DeLand, Florida.
Here’s Cramer’s advice, word for word: “No! No! No! Bear Stearns is not in trouble. If anything, they’re more likely to be taken over. Don’t move your money from Bear.”
What Really Happened To Bear Stearns
The aftermath was not pretty. “On March 14, Bear Stearns stock fell 92% on news of a Fed bailout and $2-a-share takeover by JPMorgan,” Ma said.
Despite the occasional bad call, Cramer’s net worth is still extensive.
9. Marc Faber’s Blundered Call on Obama
As editor of the Gloom, Boom & Doom Report, Marc Faber is known in Wall Street parlance as a “permabear,” the kind of guy who believes that every silver lining has a cloud. As such, he’s made some wrong calls. On Nov. 8, 2012, Faber went for broke and likely made some investors broke in the process.
On Bloomberg Business, Faber said the market would fall at least 50% after President Barack Obama’s reelection, stating: “Mr. Obama is a disaster for business and a disaster for the United States.”
The Reality of Faber’s Prediction
In the nine months following the interview, the S&P 500 had shot up by 20%. The cautionary lesson: Tuning out the pundits can help you steer clear of big money mistakes.
Pictured: S&P 500 index closed 2 points below record high in 2013
10. Jim Cramer’s Bad Call To Bail on Hewlett-Packard
The same month that Faber “crashed,” Cramer came through once again with bad advice. On Nov. 20, 2012, Cramer urged his “Mad Money” viewers to get out of Hewlett-Packard, based on his dim view of its corporate culture and other perceived issues.
How Things Really Went For Hewlett-Packard
So what happened? In six months, Hewlett-Packard shot up about 100%. “While some bad picks are unavoidable, as anyone attempting to time the market will inevitably make bad trades, some are beyond reproach, and HP was one,” said Leslie Bocskor, president and managing member of Electrum Partners in Las Vegas.
Pictured: Hewlett Packard CEO Meg Whitman applauds ceremonial opening bell on the New York Stock Exchange
11. Paul Krugman Predicts the Internet Will Stop Growing
“While there have been many ‘macro’ level calls and predictions regarding the Dow or S&P 500, there have also been some extremely poor predictions for up-and-coming investment sectors,” said Ryan Shuchman, partner at Cornerstone Financial Services in Southfield, Michigan.
Shuchman particularly points out a prediction made by Paul Krugman, a Nobel Prize winner in economics, in 1998: “The growth of the Internet will slow drastically, as the flaw in ‘Metcalfe’s law’ — which states that the number of potential connections in a network is proportional to the square of the number of participants — becomes apparent: most people have nothing to say to each other! By 2005 or so, it will become clear that the Internet’s impact on the economy has been no greater than the fax machine.”
How Internet Stocks Actually Performed From 1998 to 2005
Between 1998, when Krugman predicted the growth of the internet would begin slowing down, to 2005, which he predicted that the internet’s effect on the economy would be nullified, many internet-adjacent stocks had major returns for investors. As Shuchman pointed out, over those years Microsoft provided a 61% return, Oracle provided a 220% return, Intel provided a 46% return, Amazon provided a 912% return and Apple provided a 1,702% return. Hewlett-Packard is one of the only major internet-related stocks that went down in value, from $32.28 at the beginning of 1998 to $28.80 at the end of 2005.
“To put this in perspective, $25,000 invested on Jan. 2, 1998, with equal weighting across these six stocks would be worth $147,160 at the end of 2005,” Shuchman said. “That is a 588% increase in seven years — it seems like the Internet did have a big impact.”
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Gabrielle Olya contributed to the reporting for this article.
Pictured: Apple CEO Steve Jobs holds a copy of Apple’s new software OS X server in 1999
This article originally appeared on GOBankingRates.com: 11 Craziest Money-Losing Wall Street Moves in History