Forecasting the market, laying down macro views—it's a game not for the faint-hearted, especially if you're a celebrity in the market. Fame carries a price; you're remembered for the wrong calls as much as the right ones, and those losses sting all the harder when your followers see their portfolios bleed.
In this unforgiving era of total transparency, where even your footnotes have footnotes, the only honorable path is to own up to your blunders. If you've played fast and loose with someone's financial future, fess up. It's as simple as that.
A select few market strategists ascend to the lofty heights of universal respect, their voices heard on every hallowed trading floor. Their credentials? A glowing resume of accurate predictions, reputable institutions and esteemed alma maters as their backdrop. They command our deference and, admittedly, we're only too willing to concede they know more.
Since Abby Joseph Cohen of Goldman Sachs in the late 1990s, no one has quite held the reins of popularity like Mike Wilson of Morgan Stanley, a beloved equity strategist. Crowned king of the bear market in 2022, Wilson’s commentary was more tattooed on his forehead than spoken from his mouth. But when you're a permabear from S&P 500's 3500 to 4400—a bullish 25% shift—you're not just wrong, you're comically so.
Yet, credit where it's due: Wilson gracefully conceded his market missteps of the past nine months. The market giveth, and it taketh away—often our reputation along with it.
And what about our dear friend, Paul Krugman of the NY Times? Nobel laureate in Economics, 2008. But let's be clear, the Nobel didn't come from his market predictions.
In a delightful twist of irony, Krugman, in a 1998 piece titled "Why Most Economists' Predictions Are Wrong," foretold that the Internet's economic impact would be no greater than the fax machine's by 2005. Talk about self-fulfilling prophecies.
Nor was it just the tech sector that Krugman missed. In 2002, he declared American prosperity to have peaked. Since then, America’s GDP has more than doubled from $11 trillion to $23 trillion. And remember his 2011 dismissal of Europe's debt concerns? He even assured us Spain wouldn't face any significant crisis. A year later, European banks bailed out Spain with over $150 billion.
Given his track record, Krugman's skepticism towards AI might just be the best contrarian indicator we have. Those who view the world through a critical lens, those who grasp the seismic shifts around us, they can disregard Krugman's latest arguments on AI with ease. His comparison of the AI adoption cycle to a technology birthed a century ago is beyond ludicrous.
Krugman stumbles in assuming that AI's adoption cycle is in its infancy. The reality? The AI we see today is the result of extensive groundwork. Since 2019, Microsoft has funneled $13 billion into OpenAI, ChatGPT's progenitor. Both have splashed hundreds of millions on Nvidia’s AI chips. And let's not forget Salesforce, who launched its first AI initiative, Einstein, in 2016. Even Meta is crafting its own AI tech, preparing to integrate generative AI tools into Facebook, Instagram, and WhatsApp.
Apparently, Krugman is unfamiliar with Metcalfe's law. He sees today’s AI as a spontaneous bloom, conveniently overlooking the billions of dollars and years of development sown into this fertile field.
When confronted about his off-the-mark Internet impact prediction, Krugman offered this: "I was clearly trying to be proactive and got it wrong, which happens to all of us sometimes." Seems like history is doomed to repeat itself.
And then, there's Jim Cramer. Markets can be dry as a desert, but Cramer—oh, he's an oasis of amusement. The sleeves rolled up, the desk thumping, the voice animated—he's the WWE of financial reporting. An inverse Cramer index would likely outperform all market indexes.
We've all faced our market humiliations. But the likes of Mike Wilson, Paul Krugman, and Jim Cramer, well, they're armchair quarterbacks. They engage in opinion-slinging, not market positioning. They sleep easy at night, their risks limited to reputational damage. When your capital is your reputation, you'd better handle it with even more care than real cash. Right or wrong, their calls echo long after they're made.
We could squabble about inflation, interest rates, recessions, and even the war in Europe. But look at where the market is going. Your opinions don't dictate its direction. A force far mightier drives these peaks and valleys. Follow it. Cultivate independent thinking and, more often than not, position yourself against extreme sentiment.
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Abraham George is a seasoned investment manager with more than 40 years of experience in trading & investment and multi-billion dollar portfolio management spanning diverse environments like banks (HSBC, ADCB), sovereign wealth fund (ADIA), a royal family office, and a hedge fund.