Why Should You Care If Economists Raise U.S. Outlook ?
Look, let’s not beat around the bush: Wall Street economists, as a group, well, they suck.
Most of them did not see the crisis coming; many were deep in denial about the recession long after it started. They missed the housing boom and bust, the credit crisis. They continued to see phantom bottoms and false recoveries again and again.
In general, they were institutionally biased, preternaturally accepting of questionable data, and wed to outmoded belief systems of efficient markets. Oh, and if you listened to their advice, you lost shitloads of money.
Now, I don’t wish to paint with too broad a brush. There were plenty of individual economists who have done an outstanding job in terms of 1) seeing the coming crisis; 2) making reality-based observations about the present situation; and 3) provided helpful insight to investors and traders. Not to name names, but you frequently see their superior work highlighted here.
It reminds me of an grad school classmate, a fellow cum laude — an amusing asshole who obnoxiously said at graduation “those of us in the top 10% want to thank the rest of you for making all this possible.” Rude, but with an element of truthiness in it: You can’t have outstanding anything without a vast bulk of mediocrities.
Which brings me back to the original question: Why should anyone listen to these folks as a group? Do we want to get it wrong yet again, or do you still have some remaining cash to lose . . . ?
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Sources:
Economists Raise U.S. Outlook as Recession Fades, Survey Shows
Shobhana Chandra and Alex Tanzi
Bloomberg, July 10 2009
http://www.bloomberg.com/apps/news?pid=20601087&sid=a_Xb00lMEnNM
Economists See Fed on Hold Until 2010 Amid Jobs Weakness
PHIL IZZO
WSJ, JUNE 11, 2009
http://online.wsj.com/article/SB124464007697702065.html
July 10th, 2009 at 10:27 am
Let me guess, your grad school classmate ended up working for one of the former invertment banks, maybe Goldman Sachs?
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BR: Nope, took over dad’s business, managing the Galloping Gourmet IP
July 10th, 2009 at 10:28 am
Ritholtz asked: “Why should anyone listen to these folks as a group?”
Because they run the place. I mean Earth.
I had a conversation with a leading Wall Street i-banker that barely touched on my dollar devaluation thesis and I swear he gave me a look as if I had stuck a lemon wedge in his mouth. And this is one of the “good guys”. The powers that be don’t take CNBC seriously, but they also frown on the diatribe offered freely by your regulars including The Great CNBC Sucks, Ritholtz.
I bet no one ever buys you a beer on Broad Street.
July 10th, 2009 at 10:30 am
BR Says-
“let’s not beat around the bush: Wall Street economists, as a group, well, they suck.”
perfectly nuanced
and as for your question “why should anyone listen to economists?”
to make the contrary play of course
July 10th, 2009 at 10:32 am
“In general, they were institutionally biased, preternaturally accepting of questionable data, and wed to outmoded belief systems of efficient markets.”
Correct. Prostitutes hired to be upbeat oracles.
July 10th, 2009 at 10:34 am
Funny how grades in school don’t correlate with real life performance. I’m one of the cum laude types – never helped me in real life. In fact I would say I had to overcome it and unlearn the stuff of academic success in order to make it in the “real world”.
Just list the folks that have made a real difference. The vast majority came out of left field or failed miserably in academia. I’m thinking of folks like Bill Gates and Albert Einstein here.
Same applies to any “economist” with a string of letters after their name and a history of horribly bad calls behind them.
July 10th, 2009 at 10:34 am
tough to top that slam. i’m no economist, at least not a paid one, but i do work in the trenches (mortgage banking/residential real estate), and my pocket book since told me something was going amiss back in late ‘04. nothing i could put my finger on, just a sense that buyers were rapidly running out of gas and the local market had about peaked.
July 10th, 2009 at 10:39 am
THIS is the real market manipulation! Economists, including national organizations, and international ones like the IMF – trumpeting our soon-to-be-return-to-prosperity
July 10th, 2009 at 10:41 am
Does Krugman belong in the “suck” group or the “outstanding” group? Just by reading the faulty thinking in his editorial today, me thinks “suck”.
“The bad employment report for June made it clear that the stimulus was, indeed, too small.”
http://www.nytimes.com/2009/07/10/opinion/10krugman.html?_r=1
Krugman still doesn’t understand the difference between the size of stimulus and the timing of when it is spent. Krugman keeps harping bigger, bigger, bigger, not faster, faster, faster.
July 10th, 2009 at 10:47 am
The vast majority of people aren’t paying attention. Those who are paying attention, and who are not insiders, recognize the message as rank propaganda. Those who are in the club don’t believe a word that is being said because they wrote the script and they know it’s all bullshit.
Expertise ain’t what it used to be.
July 10th, 2009 at 11:05 am
@NA: Correct. They’re all groping around inside pigeon entrails looking for the “most correct” message.
July 10th, 2009 at 11:05 am
@MA not NA. Still early here.
July 10th, 2009 at 11:14 am
William White – former chief economist at the Bank for International Settlements in Geneva:
http://www.spiegel.de/international/business/0,1518,635051,00.html
And it looks like an actual US real-estate-related body, the Mortgage Insurance Companies of America (MICA), were also sounding their own alarm.
The plot grows thicker.
Now why again did those long-term rates stay so low – and yield curve stay so flat (even at times inverting – after the Fed started to push short-term rates up again in 2004?
Had the damage stopped there (around 2004) we’d be in considerably better shape. I think the bulk of the subprimes, alt-A’s, etc were only at the very end of the bubble.
July 10th, 2009 at 11:15 am
BR, it isn’t the economist’s opinions that have fucked me up. No, it is Bernanke et. al….fiat policies (and I am not talking monetary), that have hurt this “little guy.”
July 10th, 2009 at 11:18 am
I actually started a Masters in Economics at one point – after a few weeks realized it was a really dumb idea and dropped it. However, I was there long enough to learn a few economist jokes, e.g.:
“If all the economists in the country were laid end to end, they’d all point different directions.”
They are a source of information and opinion, to which one should always apply one’s own judgement.
July 10th, 2009 at 11:20 am
I would call it institutionalized suckiness. Everyone that was anyone smoked the pipe of sucktitude. The prime culprit was one Mr. Greenspan with his easy money, debts don’t matter, derivatives are great and other many genus thoughts. Then you had Bush, Paulson, Phil Gramm, rating agencies and many other bit players including the economists.
Why should we care what these guys think, they were in charge and ran this country straight into the ground. The economists just do what they think their bosses want. Can’t blame them, they are hired to give answers their bosses want. In fact the economists are hired because they give the right answers. If they don’t give the right answers they won’t be hired. Economists are small bit players in a huge game of stupidity.
I as of now don’t see anyone that is going to lead us out of this mess. Admitted it is a mess and I’m not sure there are any answers, let alone easy answers.
You can count on America to do the right thing after all other options are tried to failure to paraphrase Winston Churchill. We haven’t tried everything yet, so we have a ways to go.
I’m thinking there might be light at the end of the tunnel, hope so this downer of an economic picture is getting old.
July 10th, 2009 at 11:22 am
Sturgeon’s Law…90% of everything is crap. Applies to economists as well as everything else.
July 10th, 2009 at 11:25 am
“Why should anyone listen to these folks as a group? Do we want to get it wrong yet again…”
The answer is we want EVERYONE ELSE to listen and get it wrong. And the reason is this:
“those of us in the top 10% want to thank the rest of you for making all this possible.”
We should be thanking these boobs, not hating them.
July 10th, 2009 at 11:27 am
In my Grad school experience, I learned quickly that the effort to get an ‘A’ in many classes was not worth it. I also learned that there is often a wide gap between knowledge and good judgment.
“Education is an admirable thing, but it is well to remember from time to time that nothing worth knowing can be taught.” ~ Oscar Wilde
“Ignorance of all things is an evil neither terrible nor excessive, nor yet the greatest of all; but great cleverness and much learning, if they be accompanied by a bad training, are a much greater misfortune.” ~ Plato
July 10th, 2009 at 11:28 am
“I have never let my schooling stand in the way of my education.”
Mark Twain
July 10th, 2009 at 11:48 am
I’ll carve out a subset of economists and leave them out of scorn’s way. Wall Street Economists as a whole, suck. And no one listens to the few on the street (Magnus, a couple others) who are.
However, I think the general suckitude is down to two factors: Information Bias (I’ll look like an idiot of I’m both contrary AND wrong) and modeling bias (let’s look at earnings earnings earnings. So what if everything else is out of focus).
There were plenty of non-street economists who saw this coming. It wasn’t hard to spot, though one needed patience to see the shoes drop. Even the friggin’ Fed model called the recession (remember everyone pissing on the inverted yield curve as meaningless?)
July 10th, 2009 at 11:48 am
Barry: My recollection is that you won a bet with some shmuck about when the recession started. Did you win? Did you ever collect?
July 10th, 2009 at 12:18 pm
found this (old but applicable?)
http://economistsview.typepad.com/economistsview/2009/07/economists-on-trial.html
July 10th, 2009 at 12:30 pm
“they were institutionally biased, preternaturally accepting of questionable data, and wed to outmoded belief systems of efficient markets”
Bingo… and very well said. I view them as contrarian indicators. I know that sounds facetious, but it’s true. The public has not been well served by this application of this discipline. Not so much that “sciences” behind economics are faulty in as much as the human bias corrupts it.
July 10th, 2009 at 12:57 pm
Funny how grades in school don’t correlate with real life performance. I’m one of the cum laude types – never helped me in real life
——–
So you’re telling us that you are not in the top 10%?
Or are you telling us that you are but your education has nothing to do with it?
Right.
July 10th, 2009 at 1:10 pm
Hey they just want to keep people long…
July 10th, 2009 at 2:21 pm
@Kent
I agree with you about good judgement over knowledge. But unless you’re a Taoist farmer, good fortune trumps knowledge and judgement. I guess Plato kinda said that already.
July 10th, 2009 at 6:32 pm
“Prostitutes hired to be upbeat oracles.”
Duffer fluffers.
July 10th, 2009 at 8:48 pm
I was a cum laude type also. Now I only see a porn joke in that term and am much the happier for it.
July 11th, 2009 at 4:33 am
BR,
speaking of School, would you know Evelyn Berezin, Founder (Ret.), Redactron Corporation?
http://www.sunysb.edu/sb/giving/foundation-board.shtml
I understand that she’s a rather remarkable Woman..
July 14th, 2009 at 8:59 am
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