Are You Smart Enough To Time the Market?

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I have mentioned that your first step in developing a personalized investing plan is to know thyself.  We naturally tend to think that someone smarter, someone better is out there and if we find him or her it will be smooth sailing with our investing.  This post serves to illustrate how misleading that assumption is in reality.

Photo by Wagner T. Cassimro

I was scanning through some books at a local second hand store.  They were only 10 cents for paperbacks and 25 cents for hardback books so I was hoping to find something I thought was interesting and stimulating.  As I scanned across familiar authors like Grisham and Cornwall my eyes were drawn to an intriguing title: The Next Great Bubble Boom: How to Profit from the Greatest Boom in History: 2005-2009.

The Next Great Bubble Boom How to Profit from the Greatest Boom in History: 2005-2009

The first thing I immediately noticed was that the review on the cover was by well known financial writer David Bach.  So I flipped open to the front sleeve that introduced the content of the book:

The Next Great Bubble Boom – part crystal ball, part financial planner – offers comprehensive forecast for the next two decades, showing new models for predicting the future behavior of the economy, inflation, large- and small-cap stocks, bonds, key sectors,and so on.  In taking a look at the past booms and busts … [he] shows not only how bright our future will be but how best to profit from it.

For anyone thinking about writing a book on finances I have one piece of advice.  Don’t try and predict the future.  Imagine being Dent and meeting someone at a dinner party.  “Hey didn’t you write that book about how 2005-2009 the market was going to skyrocket?”

Here were some of his specific predictions:

The Dow hitting 40,000 by the end of the decade

The reality: Currently the Dow is at 8,799.260 (end of trading June 12, 2009).  For this prediction to come true over the next 18 months the market would need to surge ahead 31,201 points.  It would need to double.  Then double again and it would still be short.

The Nasdaq advancing at least ten times from its October 2001 lows to 13,500, and potentially as high as 20,000 by 2009.

Thankfully this statement was qualified with ‘potentially’ as high.  Currently as of June 12, 2009 the Nasdaq is at 1489.97.  The Nasdq would need to go up around 40% in the next seven months for this to become a reality.

Another strong advance in stocks in 2005, with a significant correction into around September/October 2006.

There most certainly was a correction.  Unfortunately, the correction brought a bear of a burden to the market.  It was deeper and more traumatic than predicted.

The Greatest Boom resurging into its final and strongest stage in 2007, and even more fully in 2008, lasting until late 2009 to early 2010.

Anyone who turned on a TV in late 2008 knows this was far from reality.


I do not think Harry S. Dent Jr. is an idiot.  I mean this book is packed full of charts, graphs, and analyses.  This guy could probably tell me more about the market and its influencing factors than I know exist.  You will not write a New York Times best seller, you will not be published by Simon & Schuster if you are an idiot.  This guy must be smart.

Bold, outspoken, dynamic investors get the attention of press and publication.  You need to say outlandish things to be recognized by the media.  I honestly wonder if Dent really believed what he wrote or just pushed it a little far just to sell more books.

The man is not the fool but the predicting is the foolishness.  As the English idiom goes, “Even a broken clock is right twice a day.”  I have personally decided that I’m not going to listen to anyone who thinks they know what is going to happen to the market.

I am going to take a guess.  I am guessing that  Harry S. Dent Jr. as a Harvard MBA, Fortune 100 consultant, and new venture founder and investor knows more about the investing world than you.  If Dent cannot predict the market future, than probably  my little internet and I should not even attempt to time the market.

I explain here why I don’t time the market.


  1. says

    I guess we know why you found that book in a second-hand store now.

    Timing the market when things are way down is fairly easy. Anyone can buy a stock when it is super cheap. The hard part is knowing when to sell and take the gains.

    Over the short-term you can probably make a few good bets and win, however market timing doesn’t work over the long run. Wise, disciplined investing, diversification and rebalancing work.

    Also, having a purpose for the money and a financial plan in place helps to avoid the “get rich quick” mentality that can creep in from market timing.
    .-= JT@RedeemingRiches´s last blog ..What Michael Jackson Teaches Us About Money =-.

    • Craig says

      I completely agree. Timing may produce some small short term wins. But as you mentioned investing is a long term endeavor. I think we all have this natural self that is tempted by the get rich quick idea (especially men). Knowing our purpose and avoiding greed goes a long way towards successful investing. Thanks for you comment.

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