It continues to amaze me how many smart people are willing to put their necks, and their reputations on the line by making a prediction about the direction of the markets.  And it’s more amazing that these smart people continue to have people listen to them, even after their predictions are wrong more often than right.

The month of September is a great example of predictions gone awry.  To start the month, we were coming off of a rough August and the economy was showing continuing signs of weakness.  Those signs were weak enough that many “experts” were predicting the dreaded “double-dip” recession.  Some still are.  When you combine that information with the “knowledge” that September has historically been cruel to investors, you couldn’t have been blamed if you took your money off the table and crawled into a hole for the month.  I even read one “expert’s” opinion that something called the “Hindenburg Omen” was indicating a total market crash in September. 

That’s scary stuff.  But if you would have listened to them, sold everything and crawled into that hole, you would have missed a pretty good month.  I’m writing this article with two trading days left in September and the Dow is up over 8%...for the month!

On the other side of the coin, earlier this week the “Stock Trader’s Almanac” announced a longer-term forecast for their readers.  For some background, the “Stock Trader’s Almanac” has been published since 1967 and is known for showing us seasonal patterns in stock market returns.  We’ve learned about the “Best Six Months” strategy which shows that since 1950, investors have made the most money by owning stocks in the Dow Jones Industrial Average between November 1^st and April 30^th, and avoiding them the rest of the year.  We also learned that the third year of the term of U.S. presidents provided the best returns.   By the way, 2011 is the third year of President Obama’s term. 

The Almanac is predicting that the Dow will enjoy an eight-year “super boom” starting in 2017 and will surge to 38,820!  I especially like the specificity of this prediction.  It’s not going to be 38,000 or 39,000…it’s going to be 38,820.  As I write this the Dow is slightly above 10,800.  That’s a gain of 28,000 points, or an 8.9% annual return for the next 15 years.  We’ll take it!

So, we should go All-In, right?  Boy, talk about conflicting signals…what’s an investor to do?  And those headlines are just about the stock markets.  Let’s talk about bonds for a minute.

All month long…maybe even all summer long, we’ve been hearing about the bond-market bubble that is about to burst.  Most investors look at the bond side of their portfolio as the anchor, or safe piece of their investment mix.  If the bond bubble does burst, Armageddon must be just around the corner.  So, should we sell off our bond holdings? 

But just this morning, I read an analyst’s report that dispelled the bond bubble “myth” and all his reasons why bonds are still the place to be.  So we should buy more? 

Remember, investment newsletters, books, and radio and television shows are in business to sell more newsletters, books and advertising, not to make you money.  We call it “financial pornography.”

And headlines like “the Hindenburg Omen” and “the Dow is going to 38,820” certainly qualify.  They may sell some books and newsletters, or get more eyes and ears for an advertiser, but can you afford to bet your financial future on a headline?

Making short-term investment decisions based on this kind of information isn’t investing, it’s gambling.  I’ve always said that if you want to gamble, go to Vegas, Atlantic City, or Monte Carlo.  At least in a casino you can get free drinks and discount meals.  When you invest, you have to tune out the noise.  Focus on your individual goals to develop an investment strategy, and then stick to that strategy.  Don’t let the latest headline, good or bad, influence your decisions.  It’s not easy, I know.  If it was, everyone would be doing it.

Oh, and don’t look now, but October is next.  Did you know that more market crashes occur in October than any other month?