Usually I comment on macroeconomic issues. This is a comment on one stock - Tesla (TSLA). The final paragraph connects back to the deeper issue of the Efficient Markets Hypothesis.
Tesla is likely to issue more stock, probably a lot of stock.
Quite to the contrary, I believe that an evolutionary perspective is the single most important idea for anyone who is interested in human behavior. To paraphrase Theodosius Dobzhansky, when seen in the light of evolution, the study of human behavior is, perhaps, intellectually the most satisfying and inspiring science. Without that light it becomes a pile of sundry facts — some of them interesting or curious but making no meaningful picture as a whole.
For example, people make New Year’s resolutions and, every year, losing weight and living a healthier lifestyle are among the most popular areas for self-improvement. Why?
Labels: Evolutionary Economics
In July 2013, I made my “Dow 5,000″ prediction that the Dow Jones Industrial Average would hit 5,000 before it hit 20,000. I have written about the macroeconomic and asset market events since my prediction.
Today, I focus on the psychological aspects. How do I feel 18 months after calling for Dow 5,000? Bad. In fact, very bad in a way that may be of more than personal interest. In the spirit of the late Rodney Dangerfield, how bad do I feel? So bad that I have trouble sleeping. So bad ...
Market Forecasts to Ignore in 2015 by Barry Ritholtz
January 5, 2015
There have been so many erroneous calls for a stock-market crash that it's hard to choose which deserves special mention. But I am going to give you two that merit attention: The first comes from Chapman University professor Terry Burnham, who predicted Dow 5,000 before Dow 20,000.
During the years he [Terry Burnham] has repeated this forecast, the market has gained about 40 percent. Read Barry Ritholtz's full article:
Mr. Ritholtz's math is either wrong or deceptive.
I published the Dow 5,000 article after the market closed on July 11, 2013. Read my Dow 5000 full article:
The historical levels of the Dow can be found in many places. Perhaps the easiest is google finance. Click on the "Dow Jones" below the graph, the select 'historical prices' on the upper left.
Value of the Dow when I made the Dow 5,000 prediction (close on July 11, 2013): 15,460
Value of the Dow when Barry Ritzhold wrote his article (close on January 2, 2015): 17,833
% change in Dow since I made my Dow 5,000 prediction [Current level - old level)/ old level]
= (17,833 - 15,460)/15,460 = 15.4%
So the Dow had risen 15.4% between my prediction and Mr. Ritzhold's article (before yesterday's 331 point decline).
Barry Ritzhold writes, "During the years he has repeated this forecast, the market has gained about 40 percent."
Is this libel to write 40 percent when the actual figure is 15.4%? I don't think so because Mr. Ritzhold's statement is technically true in that the cumulative return over 2013 and 2014 is about 40%. It is also true that, "During the century he [Terry Burnham] has repeated this forecast the market has gained about 40 million percent."
I want to point out two positives about Mr. Ritholtz's article. First, he spelled my name correctly. Second, he does point out that my prediction is neither wrong nor right because it is specifically formulated as Dow 5,000 before Dow 20,000. At Dow 20,000 I will not make any excuses. I will be wrong. Conversely, if I am right, I will be sorry that we live in a world with so many macroeconomic policy mistakes.