Alan M. Newman, Editor of Alan M. Newman’s Stock Market Crosscurrents, wrote on 8/3/09:
The analysis you offer is derived from a FREE web site that is updated only every three months. The paid subscriber newsletter is published every three weeks and forecasts in the newsletter are quite likely to change from what is shown on the free website, honing accuracy or changing an opinion on direction, if necessary.
Unfortunately, it is grossly unfair to categorize our forecasts from the free publication, especially since the primary objectives are only the “powerful commentary and unique perspectives that cannot be found anywhere else.”
We stand by that statement.
There are also huge problems with your analysis. Case in point: your interpretation of our 5/8/05 call of “Long Term Targets” for ultimate secular bear market low” of Dow 6400, SPX 680. While we believed at the time the targets were likely to occur in 2006, the timeframe was pushed out as time passed. Meanwhile, you rate the call at MINUS 80% accuracy simply because of the timeframe possibility offered in May ’05, when in fact, we rather nailed both the Dow & SPX lows which eventually occurred in March ’08. Thus, you have actually turned an astonishingly correct call into one of our worst. That’s simply unfair.
You might want to note discrepancies such as this in your analysis, in the interests of fairness. The above example is not the only one. The exact same targets were offered quite a few times before and were first presented in a speech to IFTA members in November 2003. You analysis of this and subsequent articles neglects the fact that the long term targets were hit almost ***exactly***. This continuing forecast was clearly one of the best anyone has made in the last decade. Grade it FAIRLY and our record is a LOT better than you have presented.
By the way, I’ve been at this for over 20 years and am still around. I wonder why. I do ZERO marketing. NONE. Perhaps because we are correct with our own analysis far more often than not.
Our response:
You choose to make public the (currently) 40 archived “Pictures of a Stock Market Mania” articles, spanning February 2001 through March 2009, to illustrate the value of your newsletter. You state at the end of the list of archived articles: “If you are impressed by the quality and depth of our work, you may be interested in seeing our newsletter.” It therefore seems reasonable to evaluate the accuracy of your U.S. stock market forecasts based on that public archive.
The 5/8/05 forecast you cite relates to other forecasts for the S&P 500 Index (SPX) starting in January 2003, with each subsequent forecast benefiting from new information about economic and financial market conditions:
In your 1/11/03 commentary, you state: “Our initial forecast for 2003 places the lows for the year at …SPX 680… (high odds).” The low from that date to the end of 2003 was 801.
In your 3/15/03 commentary, you state: “Our forecast for 2003 places the lows for the year at: …SPX 680… (high odds).” The low from that date to the end of 2003 was 848.
In your 5/22/03 commentary, you state: “Our forecast for 2003 places the lows for the year at: …SPX 680…” The low from that date to the end of 2003 was 933.
In your 7/26/03 commentary, you state: “Our forecast for 2003 still places the lows for the year at: …SPX 680…” The low from that date to the end of 2003 was 965.
In your 10/2/03 commentary, you state: “Long Term Targets for the bear market – odds now favor 2004: …SPX 680…” The low from that date to the end of 2003 was 1063.
In your 12/2/03 commentary, you state: “Long Term Targets for the bear market – odds now favor October 2004: …SPX 680…” The low for the S&P 500 Index in 2004 was 1063.
In your 2/7/04 commentary, you state: “Long Term Targets for ultimate bear market low – now likely in 2006: …SPX 680…” The low for the S&P 500 Index in 2006 was 1224.
In your 5/5/04 commentary, you state: “Long Term Targets for ultimate bear market low – more likely to occur in 2006: …SPX 680…” The low for the S&P 500 Index in 2006 was 1224.
In your 8/6/04 commentary, you state: “Long Term Targets for ultimate bear market low – now most likely to occur in 2006: …SPX 680…” The low for the S&P 500 Index in 2006 was 1224.
In your 11/6/04 commentary, you state: “Long Term Targets for ultimate bear market low – now most likely to occur in 2006: …SPX 680…” The low for the S&P 500 Index in 2006 was 1224.
In your 2/7/05 commentary, you state: “Long Term Targets for ultimate bear market low – now most likely to occur in 2006: …SPX 680…” The low for the S&P 500 Index in 2006 was 1224.
In your 5/8/05 commentary, you state: “Long Term Targets for ultimate bear market low – now most likely to occur in 2006: …SPX 680…” The low for the S&P 500 Index in 2006 was 1224.
In your 8/10/05 commentary, you state: “Long Term Targets for ultimate secular bear market low – most likely to occur in autumn 2006: …SPX 680…” The low for the S&P 500 Index in 2006 was 1224.
In your 11/15/05 commentary, you state: “Long Term Targets for ultimate secular bear market low – most likely to occur in autumn 2006: …SPX 680…” The low for the S&P 500 Index in 2006 was 1224.
In your 2/18/06 commentary and subsequent public commentaries through August 2008, you abandon the “SPX 680” forecast.
The S&P 500 Index did reach approximately 680 in March 2009 (not March 2008). Based on that fact, you apparently regard the forecasts for an SPX low of 680 in 2003, 2004 and 2006 to be “astonishingly correct.” The criteria for correctness in the the referenced review include (and will continue to include) both SPX level and timing, not just level at some unspecified horizon that may extend to many years. Readers can decide for themselves what criteria for forecasting accuracy make sense in assessing the value of a source.
Alan M. Newman further wrote on 8/4/09:
Regarding your response: again and unfortunately, you are making value judgments and are making them poorly. Despite your stated assumption, the public archive of past articles is not at all there to “illustrate the value of [the] newsletter” as you claim. The archive remains online as a public service ***reference*** (in fact, paid subscribers have the ability to search the archives).
You can opine all you want on the matter but the simple truth is I believed for years that the derivative bust we experienced in 2008 was inevitable and only a matter of time. I felt ***obligated*** to warn and warn and warn (whether we were paid for the information or not). Check the archives and you will see that we covered this subject in depth MANY times. A search for “derivatives” brings up 18 articles dating back to 2001. NO ONE ELSE covered the subject in depth as we did, nor did anyone else forecast either the catalyst nor the eventual extent of the damage.
That the timeframes for the forecasts of the “ultimate” bear market low needed to be pushed further and further out in time is clearly not a fault of my analysis and should NOT be made to appear as such, as you strongly imply. Nevertheless, you continue to fault EACH of these forecasts and further claim in your response that I “apparently regard the forecasts for an SPX low of 680 in 2003, 2004 and 2006 to be “astonishingly correct.” No, sir. I regard ALL the forecasts of an “***ultimate secular bear low***” of Dow 6400 and SPX 680 to be astonishingly correct, and additionally because the forecasts were made well before anyone else even postulated such an event would occur AND because the forecasts were reiterated time and time again.
In all fairness, EVERY ONE of the 14 forecasts that specified the Dow 6400, SPX 680 levels for the bear market low do not deserve to be rated as you have interpreted.
What is ***particularly galling*** is that your original analysis states “a few very bad forecasts make the average absolute error high” yet those are the very same forecasts that ALL caught the secular bear market bottom stock index price levels almost exactly – even though the first was offered six years before the fact!!!
Clearly, your methodology has its limitations.
Our response:
Same as previous response.
The approach and data in the referenced review are fully available to readers. As always, we invite readers to make their own judgments based on criteria important to them.
