As we've stressed before, no one knows the future except God. Not even the best and brightest financial "experts" have a good track record for accurate predictions.
Writing at SmartMoney.com, Jonathan Hoenig takes note of a few things that the experts got wrong when, at the end of the 1990s, they looked ahead to the next decade:
It was just about 10 years ago, you might remember, that AOL merged with Time Warner in a $182 billion agreement dubbed "The Deal of the Century." It was obviously a short century: The company plans to spin off AOL on Dec. 9 at a valuation estimated near $3.5 billion dollars. Ten years ago, it was valued at more than $160 billion.
Back then, with the stock near a split-adjusted $1,000 a share, Morgan Stanley analyst Mary Meeker issued an "outperform" on shares of Priceline.com, writing "the risk of missing a big winner here may be greater than suffering from what may become near-term valuation issues." Shares ultimately fell as low as $6 by 2002.
And it was almost a decade ago when author Gene Walden published The 100 Best Internet Stocks to Own for the Long Run, touting companies like PSINet, Copper Mountain Networks, PurchasePro.com and FirePond, Inc. At the time, those looked like smart bets. Now they're either defunct or destroyed.
Ten years ago the Dow Jones Industrial Average closed above 11,000 for the first time. How many of the nation's best academics or industry analysts could have foreseen it trading below that a decade out?
The point is that forecasting is an inexact science. Even when equipped with the best tools and most accurate data, the world's best prognosticators are often startlingly wrong, especially when looking 10 years into the future.
Hoenig goes on to apply the lessons of such forecasting follies to the current health care debate and claims such as: "[Over the next 10 years, this plan will not] add a dime to the deficit - in fact, quite the opposite." So spoke Senate Majority Leader Harry Reid recently, based on Congressional Budget Office projections.
If that forecast turns out to be "startlingly wrong," we really shouldn't be startled at all. After all, as Yogi Berra once said, "It's difficult to make predictions, especially about the future."
(For more on highly touted business deals that went bad, read this article - subscribers only - from yesterday's Wall Street Journal. It begins: "It is like walking through the tombstones on a battlefield. All that hope left in ruins...")
Joseph Slife is a contributing author and editor for SMI. Visit www.soundmindinvesting.com to learn more.