{"id":18024,"date":"2023-04-05T23:56:00","date_gmt":"2023-04-05T15:56:00","guid":{"rendered":"https:\/\/www.granitefirm.com\/blog\/us\/?p=18024"},"modified":"2025-06-07T11:13:47","modified_gmt":"2025-06-07T03:13:47","slug":"should-not-trust-forecasts","status":"publish","type":"post","link":"https:\/\/www.granitefirm.com\/blog\/us\/2023\/04\/05\/should-not-trust-forecasts\/","title":{"rendered":"Investors should not trust forecasts"},"content":{"rendered":"\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_82_2 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #ffffff;color:#ffffff\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #ffffff;color:#ffffff\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2023\/04\/05\/should-not-trust-forecasts\/#Buffett_admits_he_has_no_ability_on_forecasts\" >Buffett admits he has no ability on forecasts<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2023\/04\/05\/should-not-trust-forecasts\/#No_one_can_forecast_correctly\" >No one can forecast correctly<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2023\/04\/05\/should-not-trust-forecasts\/#Buying_good_businesses_at_reasonable_prices\" >Buying good businesses at reasonable prices<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2023\/04\/05\/should-not-trust-forecasts\/#Price_not_time\" >Price, not time<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2023\/04\/05\/should-not-trust-forecasts\/#Make_the_numbers\" >Make the numbers<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2023\/04\/05\/should-not-trust-forecasts\/#My_view\" >My view<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2023\/04\/05\/should-not-trust-forecasts\/#A_discussion_of_this_topic_in_my_book\" >A discussion of this topic in my book<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2023\/04\/05\/should-not-trust-forecasts\/#Most_investors_do_need\" >Most investors do need<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2023\/04\/05\/should-not-trust-forecasts\/#Companies_are_willing_to_provide\" >Companies are willing to provide<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2023\/04\/05\/should-not-trust-forecasts\/#Objection_to_manipulate_numbers\" >Objection to manipulate numbers<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-11\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2023\/04\/05\/should-not-trust-forecasts\/#Related_articles\" >Related articles<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Buffett_admits_he_has_no_ability_on_forecasts\"><\/span>Buffett admits he has no ability on forecasts<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>In his <a href=\"https:\/\/www.ivey.uwo.ca\/media\/2975913\/buffett-partnership-letters.pdf\" target=\"_blank\" rel=\"noreferrer noopener\">1966 letter to shareholders<\/a>, Buffett set out his views on investor should care about company performance but not market performance. The following parts in italics are my complete excerpts:<\/p>\n\n\n\n<p><em>\u201cI am not in the business of predicting general stock market or business fluctuations. If you think I can do this, or think it is essential to an investment program, you should not be in the partnership.\u201d<\/em><\/p>\n\n\n\n<p>In <a href=\"https:\/\/berkshirehathaway.com\/letters\/1994.html\" target=\"_blank\" rel=\"noreferrer noopener\">Buffett&#8217;s 1994 shareholder letter<\/a>, Buffett went a step further by detailing his view that investors put too much faith in forecasts.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"No_one_can_forecast_correctly\"><\/span>No one can forecast correctly<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p><em>We will continue to ignore political and economic forecasts, which are an expensive distraction for many investors and businessmen. Thirty years ago, no one could have foreseen the huge expansion of the Vietnam War, wage and price controls, two oil shocks, the resignation of a president, the dissolution of the Soviet Union, a one-day drop in the Dow of 508 points, or treasury bill yields fluctuating between 2.8% and 17.4%.<\/em><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Buying_good_businesses_at_reasonable_prices\"><\/span>Buying good businesses at reasonable prices<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p><em>But, surprise &#8211; none of these blockbuster events made the slightest dent in Ben Graham&#8217;s investment principles. Nor did they render unsound the negotiated purchases of fine businesses at sensible prices. Imagine the cost to us, then, if we had let a fear of unknowns cause us to defer or alter the deployment of<br>capital. Indeed, we have usually made our best purchases when apprehensions about some macro event were at a peak. Fear is the foe of the faddist, but the friend of the fundamentalist.<\/em><\/p>\n\n\n\n<p><em>A different set of major shocks is sure to occur in the next 30 years. We will neither try to predict these nor to profit from them. If we can identify businesses similar to those we have purchased in the past, external surprises will have little effect on our long-term results.<\/em><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Price_not_time\"><\/span>Price, not time<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p><em>We try to price, rather than time, purchases. In our view, it is folly to forego buying shares in an outstanding business whose long-term future is predictable, because of short-term worries about an economy or a stock market that we know to be unpredictable. Why scrap an informed decision because of an uninformed guess?<\/em><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Make_the_numbers\"><\/span>Make the numbers<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Buffett also said in his <a href=\"https:\/\/berkshirehathaway.com\/letters\/2002pdf.pdf\" target=\"_blank\" rel=\"noreferrer noopener\">2002 shareholder letter<\/a>:<\/p>\n\n\n\n<p>Charlie and I not only don\u2019t know today what our businesses will earn next year \u2013 we don\u2019t even know what they will earn next quarter. We are suspicious of those CEOs who regularly claim they do know the future \u2013 and we become downright incredulous if they consistently reach their declared targets. Managers that always promise to \u201cmake the numbers\u201d will at some point be tempted to make up the numbers.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"My_view\"><\/span>My view<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>My personal opinion is quite different from that of Buffett. I have also expressed my opinion on this subject many times in my book.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"A_discussion_of_this_topic_in_my_book\"><\/span>A discussion of this topic in my book<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>I discuss this topic in almost the entire section of chapter 6, subsections 6-5, pages 297-302 of the book &#8220;<a href=\"https:\/\/www.books.com.tw\/products\/0010935641?sloc=main\" target=\"_blank\" rel=\"noreferrer noopener\">The Rules of 10 Baggers<\/a>&#8220;.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Most_investors_do_need\"><\/span>Most investors do need<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Because most investors who are retail investors, especially the more conservative investors, still need listed companies to be able to give estimates of their future business and prospects. The estimated value does not need to be very accurate, nor is it a random guess, but at least it needs to have a range, so that investors can have a rough outline of the company&#8217;s future operations.<\/p>\n\n\n\n<p>Most investors need it because they cannot keep an eye on the stock market like professional investors. Retail investors need to have a guiding direction, so as to have a general outline and direction for the future operation of the stocks they hold.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Companies_are_willing_to_provide\"><\/span>Companies are willing to provide<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>This is why most of the listed companies now, when the market and the economy are flat, will give a range of estimates for the company&#8217;s next quarter, as well as the future business and outlook of the year. And don&#8217;t forget, in the annual report and annual shareholder letter of listed companies, the CEO will also express his views on the year and future business and outlook. All of these indicate that US stock companies basically agree and are willing to disclose the company&#8217;s future business and outlook to investors.<\/p>\n\n\n\n<p>This is why from 2022 to the present, when the economic outlook is uncertain, many companies that used to provide financial forecasts, because they have become conservative, they really cannot provide a range of financial forecasts.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Objection_to_manipulate_numbers\"><\/span>Objection to manipulate numbers<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>However, I am opposed to the situation where companies really cannot estimate future business and prospects, such as when the economic outlook from 2022 to now is unclear, and they just give forecasts. Because the predictions that are forced out will definitely become pure guesswork and irresponsible mistakes, which will be a kind of harm to investors.<\/p>\n\n\n\n<p>The manipulated  numbers must not be honored, and the result is only fake.<\/p>\n\n\n\n<p>I believe that Buffett&#8217;s objection is referring to this situation (I agree with this part).<\/p>\n\n\n\n<figure class=\"wp-block-image size-full\"><img loading=\"lazy\" decoding=\"async\" width=\"232\" height=\"96\" src=\"https:\/\/www.granitefirm.com\/blog\/us\/wp-content\/uploads\/sites\/2\/2023\/02\/forecast-1600x1200-1.jpg\" alt=\"forecasts\" class=\"wp-image-18025\"\/><figcaption class=\"wp-element-caption\">credit: relexsolutions.com<\/figcaption><\/figure>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Related_articles\"><\/span>Related articles<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2021\/07\/04\/how-investors-should-look-at-economic-trends-and-forecasts\/\">How investors should look at economic trends and forecasts?<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2025\/06\/06\/seeking-facts\/\">Seeking facts is the first step in investment<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2022\/11\/16\/important-and-knowable-info\/\">Information investors need should be important and knowable<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2022\/08\/01\/timing-the-market\/\">Why timing the market or band trading simply not work?<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2023\/04\/01\/focus-company-performance\/\">Focus on company performance rather than market<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2023\/04\/05\/should-not-trust-forecasts\/\">Investors should not trust forecasts<\/a>&#8220;<\/li>\n<\/ul>\n\n\n\n<p><em><strong>Disclaimer<\/strong><\/em><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><em>The content of this site is the author\u2019s personal opinions and is for reference only. I am not responsible for the correctness, opinions, and immediacy of the content and information of the article. Readers must make their own judgments.<\/em><\/li>\n\n\n\n<li><em>I shall not be liable for any damages or other legal liabilities for the direct or indirect losses caused by the readers&#8217; direct or indirect reliance on and reference to the information on this site, or all the responsibilities arising therefrom, as a result of any investment behavior.<\/em><\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"<p>Buffett admits he has no ability to forecast, manipulated numbers must not be honored, if forecasts cannot meet,  and the result is only fake.<\/p>\n","protected":false},"author":1,"featured_media":18025,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11,50,404],"tags":[],"class_list":["post-18024","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-buffett","category-benjamin-graham","category-economics"],"_links":{"self":[{"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/posts\/18024","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/comments?post=18024"}],"version-history":[{"count":21,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/posts\/18024\/revisions"}],"predecessor-version":[{"id":36937,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/posts\/18024\/revisions\/36937"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/media\/18025"}],"wp:attachment":[{"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/media?parent=18024"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/categories?post=18024"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/tags?post=18024"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}