The problem I see in this thread is all about forecasting. It’s very easy to advocate what your model tells you, much more difficult to question the underlying model itself. And no matter what, the excessive monetary liquidity and the surge in non-traditional financing in the past few years are significant and need to be considered. There is a good argument that the forecasts are not representing the market. This is very evident internally in the big mortgage/financial services companies who are taking a bath now because their forecasts are plain wrong, and they are having to restate earnings.
Perhaps we need to question the way forecasting is done. The large-grain aggregate data and financial models are actually tied to individual assests. The information is there for up-to the minute real time data on all assets. The vast majority of the industry just doesn’t have the vision and talent to consolidate the data sorces. Less time needs to be spent on averages, and more on control charts, teasing apart normal and extraordinary variation.
My background is in experimental psychology, so I am very aware of this human desire to put data into an “engine” that will magically give you an “answer.” It doesn’t seem to me unresonable to ask if the forecasting engines are wrong, thus making your answers irrelevant.
