Thursday, March 8, 2012

A Few Crazy Predictions in Global CFO Survey

Duke University and CFO magazine recently released their quarterly Global Business Outlook Survey for the first quarter of 2012. In the survey about 450 CFOs gave their best predictions for the S&P 500. Here are some of their predictions (based on the median response)

- Expected return over next 10 years = 6%/yr
- 10% chance return will be less than 2%/yr over the next 10 years
- 10% chance return will be greater than 10%/yr over the next 10 years
- Expected return over the next year (from 2/17) = 6%
- 10% chance return will be negative over the next year (from 2/17)
- 10% chance return will be greater than 10% over the next year (from 2/17)

Now none of those may seem too crazy. Except I think it is borderline delusional to believe there is only a 10% chance of a negative return over the next year considering current valuations. But if you want to see some truly wacko predictions, take a look at the extreme answers given in the "minimum" and "maximum" response column for each question.

A few of my favorites

- Someone thinks there is only a 10% chance the return over the next year will be LESS than 70%!?!
- Someone thinks the average annual return over the next 10 years will be 60%/yr!?!
- Someone thinks there is only a 10% chance the average annual return over the next 10 years will be LESS than 70%/yr!?!

So what we have there is either some truly crazy CFOs or some CFOs that need to take classes in reading comprehension before completing the next survey.

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