Can CFOs Pick Stocks?

Many of the means we have for taking the temperature of the economy involve asking people where they think our financial situation is headed. This can take the form of asking run-of-the-mill consumers to answer a consumer confidence survey, or talking to business executives about whether they'll be bring more people in the future.

Strangely enough, a recent survey indicates that the top exec may not have a better handle on certain things. Ever since 2001, Duke University has asked CFOs at major American corporations to predict where the S&P 500 would land over the next 12 months. They were even allowed to give an interval, where there was a 10 percent likelihood the S&P would exceed their upper limit and a 10 percent likelihood it would come in below their lower limit. Even within those parameters, the CFOs could place the S&P 500 within the 80 percent confidence interval only a third of the time.

The point isn't that CFOs are worse than anyone else at predicting the direction of the market. The point is that it's very hard to predict the direction of the market - which is why the best investors tend to be long-term, buy-and-hold proponents like Warren Buffett.