Tests of Predictions (Update 01)

I saw another prediction in The Daily Express (7 October 2010) for the Crude Palm Oil (CPO) price. Current CPO price was around RM2,600 per mt. These "experts" predicted CPO price to reach RM2,950 per mt in 3 months, then RM3,300 per mt in 6 months and finally to RM3,600 in 9 months.

SUMMARY OF PREDICTIONS BEING TRACKED:

1. CPO price to reach RM3,600 per mt within the next 9 months; i.e. by June 2011 (CPO price was RM2,920 today 11 October 2010).
2. KLCI to reach 1480 by 31 December 2010 ( KLCI was 1481 on 8 October 2010)
3. OPR to remain 2.75% for 2010 (OPR was last raised 8 July 2010 to 2.75%).
   

I hope to show that most predictions are not very useful (i.e. mostly failed). As Nassim Taleb commented; we can only say what the future direction looks like from today's viewpoint, but the truth is that we don't know. We definitely cannot quantify the future.

What is ECM Libra going to say now on the predicted year end KLCI; since the index had already exceeded the 1480 predicted? Are they going to simply raise their prediction (citing some factors ...), or will they say that KLCI will be flat for the next 3 months, or will they say that any further increases in the next three months will be lost before the year end?

Nassim Taleb suggested that we do not allow ourselves to be confused by all these "noise". In fact, he suggested that we do not read/watch the business news!