A Brief Word to Forecasters: STFU!



My Sunday Washington Post Business Section column is out. This morning, we look at the annual forecasting foolishness so prevalent in the media.

By now, you know the drill: A bunch of analysts make their annual predictions, and of course, they are utterly useless. Here’s an excerpt from the column:

“It’s that time of year again when the mystics peer deep into their tea leaves, entrails and crystal balls to divine what’s ahead.

Which means it’s also time for my annual reminder: These folks cannot tell the future. Ignore them.

Most forecasters are barely familiar with what happened in the past. Based on what they say and write, it is apparent they often do not understand what is occurring here and now. Why would anyone imagine that they have the slightest clue about the future?

This is not my opinion, but a simple statistical fact: The data overwhelmingly show that the skill set of the predictive pundits is no better than a coin toss. The odd person gets these forecasts about the economy and stock markets right each year, but the lack of any sort of consistent winners and losers means that, mathematically, it is a random outcome.”

I speak with numerous experts about the subject, including:

-James O’Shaughnessy (author of the classic “What Works on Wall Street,” and CIO of O’Shaughnessy Asset Management

-Morgan Housel, a columnist for the Motley Fool

-Michael Johnston (Poseidon Financial. author of “A Visual History of Market Crash Predictions” and “The Not-So-Surprising Truth About Gold Bugs.”)

-Laszlo Birinyi (researcher and market historian)

-David Rosenberg (chief economist and strategist at Gluskin Sheff)

They name names and dates and forecasts; hilarity ensues . . .


Would you let a mystic manage your investment portfolio?
Barry Ritholtz
Washington Post, November 29, 2015



Category: Analysts, Investing, Really, really bad calls

10 Sunday AM Reads

My Sunday morning lazing-about-the-house-ate-too-much-this-weekend reads: • If Factor Returns Are Predictable, Why Is There an Investor Return Gap? (Research Affiliates) • Metals prices are falling knives. Don’t make the mistake of catching them (Bloomberg) • Myth: Stocks Are In Trouble When Commodities Tank (Ciovacco Capital) • Why driving in the US is making a big comeback (Vox) see also 50…Read More

Category: Financial Press


In 1962 Hitchcock and Truffaut locked themselves away in Hollywood for a week to excavate the secrets behind the mise-en-scène in cinema. Based on the original recordings of this meeting—used to produce the mythical book Hitchcock/Truffaut—this film illustrates the greatest cinema lesson of all time and plummets us into the world of the creator of…Read More

Category: Film, Weekend

ISIL’s psychotic ambitions

Terrorist rings come and go throughout history, and Da’ish (ISIL) is the latest to spread horror and fear to a marred civilization.  The research here (assembling thousands of data points from regional news and government sources) shows that terrorism is on the rise, squeezed in one location(s) at times but sooner or later spread out in others….Read More

Category: Think Tank, War/Defense

Germany’s Energy Revolution

Almost half of Germany’s energy currently comes from coal. By 2050, the country hopes to get 80 per cent of its energy from renewable sources. This expertly shot short film from National Geographic offers a vision of Germany’s energy transition, and perhaps, the future of energy worldwide.

Category: Energy, Science, Video

MiB: Ken Fisher of Fisher Investments

This past week, our Masters in Business radio podcast, we speak with Ken Fisher, who manages $68 billion for Fisher Investments, author of 11 books and the longest running columnist for Forbes. Fisher describes building a firm from the ground up, having “no idea what he was doing.” Despite calling himself the Forrest Gump of finance, he talks…Read More

Category: Podcast

10 Weekend Reads

Kick back, pour yourself some strong joe, and settle in for our longer for weekend reads, straight from the meanest part of Chicago: • Even Michael Lewis Was Surprised Hollywood Bet on The Big Short (Vanity Fair) • Department of Defense Head Ashton Carter Enlists Silicon Valley to Transform the Military (Wired) • Bread Is Broken: Industrial production…Read More

Category: Financial Press

Succinct Summation of Week’s Events 11.27.15

Succinct Summation of Week’s Events: Positives: 1) US Durable goods orders in October rose .5% m/o/m ex transports which was two tenths better than expected and September was revised up by a few tenths. Importantly, the core measure rose 1.3%, well better than the forecast of up .2% and September was revised from -.1% (revised…Read More

Category: Markets

Meet the Little Toy Company Behind Star Wars’ BB-8 Drone

Until this year, Sphero had been a small tech startup making a very niche product: remote controlled, plastic, robot balls. When Disney announced that one of the most recognizable characters in the new “Star Wars” movie would be a cute little robot ball, Sphero suddenly became the center of the toy world. Bloomberg spoke to Sphero co-founder Adam Wilson about how the introduction of BB-8 dramatically changed his company.

What Happens When a Little Toy Company Meets ‘Star Wars’

I have one, its crazy cool and drives the dogs insane!

Category: Corporate Management, Film, Video

AEI Dissembling Continues Apace on Seattle Min Wage

@TBPInvictus here

The City of Seattle’s minimum wage is now $11, going up to $15 for some employers by 2020. Mark Perry has posted his monthly missive on how April’s minimum wage hike is destroying restaurant employment there:


Perry Seattle
Source: Dissembling Central


I’ve pointed out ad nauseam that this larger region is irrelevant to any discussion of the minimum wage debate. While the min wage has gone up in the City of Seattle, that may or may not have an impact on the entire — and many times larger — Seattle MSA.

The Seattle-Tacoma-Bellevue Metropolitan Statistical Area (MSA) that Perry likes to harp on is comprised of three counties – King (in which Seattle resides), Pierce, and Snohomish. The MSA has a population of some 3.6 million versus the city’s population of about 660,000. In other words, almost 3 million people, or about 72% of the total, reside (and likely work) outside the area are where the minimum wage was hiked.

To use this as the basis of a minimum wage critique is either incredibly ignorant or purposefully misleading. It does not reflect well on its authors. This inexcusable approach means that AEI has been party to what is an obviously false analysis. That is why amongst knowledgeable analysts, AEI are known as a “Stink Tank.” Everything they produce comes with the stank of its dubious validity and questionable intellectual honesty.

AEI seems to have finally figured out that obviously lying about data is going to get them called out as the fabricators they have unfortunately morphed into: The most recent post by Perry includes a disclaimer indirectly admitting this entire line of argument has been a scam. There has not been the sort of intellectual honesty where one admits error — no mea culpa like BR does — but instead a “Technical Note” at the end of the post essentially explaining why the entire post is utter nonsense. I assume AEI forced this on Perry in order to protect their already damaged reputation.

Technical Note: The BLS restaurant employment data for the Seattle MSA covers the entire metro area of 3.6 million people, while the population in the city of Seattle, which is the only part of the MSA that is subject to the eventual $15 an hour minimum wage, is only about 652,000. Therefore there are several possibilities when considering the loss of 900 restaurant jobs this year . . .

Even that is not a fair and honest disclaimer, as it posits a number of possible scenarios, rather than admit that the MSA is not relevant to the City of Seattle.  We just don’t have sufficient data to draw a conclusion.

As I’ve said all along, there are simply no inferences to be made about the city from the MSA. But don’t take my word for it – here (again) is what regional economist Annaliese Vance-Sherman had to say about it:

It is not possible to draw conclusions about the city based on the MSA.

I think it is important to remember that the $15 minimum wage was a city-level ordinance. The City of Seattle falls within a large urban county (King County), which consists of 39 cities including Seattle. In turn, the county is one of three large urban counties that make up the Seattle MSA.

People from the City of Seattle are not going to drive two counties north or south, or cross the mountains, for a burger. If there is a border effect, it would be well within the MSA (well within the boundaries of the county, actually), and would register as a net zero change.

Without re-creating the chart, what could be showing up in this chart is that the recovery in Seattle has been stronger (and earlier) than the remainder of the state. The increased momentum in hiring could be representative of the relatively delayed recovery outside of the Seattle MSA.

For those who may (inexplicably) be new to this issue, here’s a map of the aforementioned tri-county area:

Screen Shot 2015-08-17 at 6.08.17 PM


Sadly for Perry, who has married his original bad analysis and refuses to do any further investigating, there is more accurate data out there on employment in the state of Washington, compiled by the Employment Security Department of Washington State. At their site, we can explore and examine each of the counties on a stand alone basis.

Read More

Category: Current Affairs, Data Analysis, Employment, Really, really bad calls, Wages & Income