| Interest Rate Forecast
The Investment U e-Letter: Issue # 401 Interest Rate Forecast… The World’s Best Prediction for 2005 Will Surprise You Today I’ll show you why those 55 out of 56 economists are likely wrong, and how it leads me to believe that interest rates have a better chance of heading lower in 2005 rather than higher. Right about now you probably don’t believe my interest rate forecast. But you will after reading what I share with you… “The Experts” Disastrous Interest Rate Forecast Track Record Twice a year, the Wall Street Journal polls economists for their interest rate forecasts and predictions. It’s nice of the Wall Street Journal to make the effort. However, after having 46 polls of the experts since 1982, the historical record shows that the only use of the “expert” interest rate forecasts is as a contrary indicator. Let me explain:
In the last six polls, the “experts” have predicted HIGHER interest rates in every poll. However, interest rates have steadily moved down. In fact, interest rates have been consistently moving down since the early 1980s, and the experts have consistently predicted incorrectly. The actual interest rate forecast record of the world’s highest paid financial “experts” for forecasting interest rates is nothing short of disastrous. Not only were they not even close in forecasting what interest rates would be, they couldn’t even predict the direction interest rates would move correctly. Since 1982, the beginning of Wall Street Journal’s Forecasting Survey, the experts have gotten the direction of interest rates right in their forecasts less than one third of the time.
Said another way, you or I could have flipped a coin as our forecast of the direction of interest rates. And we would have crushed the predictions of the experts. Right now, 55 out of 56 experts are predicting higher long-term interest rates in 2005. Most people will believe these forecasts. Investment U readers will know these interest rate forecasts are completely worthless. If they have any value at all, it is as a contrary indicator… Which tells us that interest rates may well fall in 2005. Good investing,Steve Today’s Investment U Cribsheet
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