Are Index Forecasts and Evaluations Accurate?

There's so much financial information to wade through, and so much of it doesn't seem to add up. For example, The April 18-24, 2011 Bloomberg-Businessweek had an article called 'The Bubble This Time' and referred to Robert Shiller, an inventor of the Case-Shiller Housing Index. What he is quoted as saying by Bloomberg is "the S&P 500 is trading at 23 times earnings normalized over 10 years." If the rule of 18 holds any weight, the S&P 500 Index P/E ratio is over 17 for the first two weeks of April.

Yet one doesn't have to go far to find competing information. In January of this Year Steve Hassett of Seeking Alpha calculated the S&P 500 index was undervalued by 7 percent. At the same time The Street was reporting on a Blackrock forecast a S&P 500 high in 2011 due to cash flow driven high merger and activity activity and stronger balance sheets. In February, Bloomberg quoted a UBS AG, a financial services firm, as forecasting a 1475 high for the index in 2011.

It goes on and on, the estimates, financial opinions and forecasts are driven by financial analysis models. If so many models all forecast different things, how valid can one really expect any one of them to be? Perhaps financial intuition is just as valid. Clearly, financial forecasting model results need to be understood with a grain of salt or an additional model specifically designed to interpret their usefulness.