3 News Stories That Prove Nobody on Wall Street Has a Perfect Crystal Ball
The great investor Benjamin Graham famously said: "In the short run, the market is a voting machine, but in the long run, it is a weighing machine." We could also say that the market is a soothsayer, an oracle: Values are set based on what we think is going happen, and what companies tell us they think is going to happen. But if Wall Street lives on predictions, it endures plenty of wrong ones. For example, the leaders of the rising co-working powerhouse The We Company last month offered an array of upbeat forecasts in their IPO filings, and predicted an ambitious range for the offering price. But since then, everything has gone sideways, and on Tuesday, it said it was putting the going-public process on hold.
Another example: When Berkshire Hathaway and 3G Capital joined forces to swing the merger of Kraft and Heinz a few years ago, the common view forecast success, because with a team-up like that backing the deal, a win was in the bag. But that's not how it has played out, and Tuesday, investors were unhappy to hear that 3G had recently sold 25 million shares of Kraft Heinz (NASDAQ: KHC). Last example: A pair of consultancies just forecast similar good things about the upcoming holiday shopping season. But one added a serious hedge to its prediction.
In this episode of MarketFoolery, host Chris Hill and Motley Fool Asset Management's Bill Barker discuss these news stories and more.
Source Fool.com
