A long time ago before the inception of email and the Internet, some investment advisors made a living selling investment books and/or newsletters. There are still plenty of investment authors and books around today, but the newsletters have given way to investment emails, web sites, podcasts, and TV pundits hawking everything from stocks and cryptocurrencies to even more exotic speculations. The communication sources may have changed but the advice hasn’t. Is any of the advice you are receiving in this fashion worth paying attention to?

Here are examples of some of the most inaccurate investment books. Let’s start with “Dow 36,000: The New Strategy for Profiting from the Coming Rise in the Stock Market,” that was published in October 1999 by James Glassman and Kevin Hassett. The Dow had soared from 2,800 at the start of 1990 to over 9,600 when the book came out, and the authors predicted that its value would further triple by 2004. The Dow actually peaked at a little over 11,700 in 2004 but did not make it to 36,000 until November 2021.

Then there’s Bob Zuccaro, who wrote a book at about the same time titled “Dow 30,000 by 2008!: Why It’s Different This Time.” He came a bit closer to the mark, perhaps because he left himself more time for his prediction to come true. The Dow did manage to get as high as 14,000 by July 2007, but then crashed to under 8,000 in October 2008 before making its long upward slog to 30,000 some twelve years later.

This year Harry Dent, another serial investment book author, is predicting the “Crash of a Lifetime” (a loss of 86%) in his latest book. Ric Edelman of Edelman Financial Engines has chronicled Dent’s predictions over the past thirty years. One example: 2004’s “The Next Great Bubble Boom: How to Profit from the Greatest Boom in History.” Despite the title, the period in question actually saw the most severe market collapse since the 1930s. All the other Dent books Edelman cites turned out to be wrong as well. As Edelman puts it, “when it comes to Harry Dent, the best thing you can do is the exact opposite of whatever he says.” (See https://www.thinkadvisor.com/2024/07/10/follow-harry-dent-at-your-own-peril/.)

The most definitive study that I could find addressing the effectiveness of financial newsletters was a report entitled “The Performance of Investment Newsletters” released by the Federal Reserve Bank of New York in 1998 (https://www.newyorkfed.org/research/economists/medialibrary/media/research/staff_reports/sr48.pdf). The authors concluded that the securities recommended by investment newsletters generally failed to outperform. They also observed that the newsletters tended to recommend securities that had previously done well. This is well-explained in Dan Gardner’s 2011 book “Future Babble.” He points out that most expert predictions tend to be a continuation of current thinking rather than something unique. Recall the crash of 2008? How many experts at that time were predicting that by the end of 2009 the S&P 500 would bounce back over 26%?

The message here is that any prediction about the future, regardless of any fancy technological jargon accompanying it, is still nothing more than a guess. If you base your investment decision-making on such prognostications, you are in effect gambling with your money. Yogi Berra, the master of malapropisms, put it succinctly: “It’s hard to make predictions…especially about the future!”