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My Sunday Washington Post Business Section column is out. This morning, we look at a regular slice of silliness this time of year, the Folly of Forecasts. The print version had the full headline Your short guide to getting ahead of forecaster folly for 2012 while the online version is merely Investing in 2012: Get ahead of forecaster folly.

This is a favorite subject of mine, having penned The Folly of Forecasting for TSCM so very long ago. This morning in WaPo, I revisit the subject. Instead of making forecasts about what I expect to happen in 2012, I forecast what the forecasters will be forecasting for 2012.

Here’s an excerpt from the column:

“Because of this folly of forecasting, I try not to make many predictions. Whenever I am asked where the economy is going, who is going to win that year’s elections or what the markets are going to do, I steal a trick from the weatherman: Always couch your forecasts in probabilities. That way, when I am wrong — and anyone who pretends to know what will happen in the future will frequently be wrong — at least I can declare the outcome was an anticipated probability.

“As we stated last January, there was a 10 percent chance that the Federal Reserve’s Hobbensobbers were going to be trounced by the bond market’s Rebblesacks — and that’s exactly what happened!”

It’s a great cheat to avoid saying silly things in public that could come back to haunt you.

These are my 10 forecasts as to what the forecasters will be forecasting for 2012:.”

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The Post did a nice job in the dead tree version — the layout and art work are cute:
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click for ginormous version of print edition


Source: Jan 1 2012 print edition

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Source:
Your short guide to getting ahead of forecaster folly for 2012
Barry Ritholtz
Washington Post, January 1 2012  
http://www.washingtonpost.com/business/investing-in-2012-get-ahead-of-forecaster-folly/2011/12/29/gIQAGx2OQP_story.html

Washington Post Sunday, January 1 2012 page G6(PDF)

Category: Apprenticed Investor

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

8 Responses to “Forecaster Folly for 2012”

  1. kcowan says:

    That is a great prognosis. Really appreciated it.

  2. How to detect and bust spew freaks, politicians, liars, etc.
    http://www.nowandfutures.com/spew_tools.html

  3. victor says:

    Nassim Taleb: Economics provide very complicated equations — but our historical track record in predicting is pitiful. It does not take long to verify these claims; simple empiricism would suffice. Yet we have confident forecasts of social security deficits by both sides (democrats and republicans) twenty and thirty years ahead! This Scandal of Prediction is far more severe than religion, simply because it determines policy making. Last time I checked no religious figure was consulted for long-term business and economic projections.

  4. jb.mcmunn says:

    Gold finished 2011 up 10%. It didn’t beat bonds but it sure was better than stocks. Please give me 30 more years of “comeuppance ” like this, compounded at 10% per year.

  5. Gold was up ~35% YTD in August — thats a mere 4 months ago, and its down 25% since then.

    It was a very crowded trade, held by speculators who seem to be even more emotional then equity investors with a deep, almost religious belief in the metal.

    Back in July, I presented to the Agora Financial Investment Symposium — look at slides 26-34 — that part of the discussion was titled “Gold is a Trade, Not a Religion.
    http://www.ritholtz.com/blog/2011/07/bulls-bears-piigs/

    For the 30 years when Gold did nothing, was flat during the greatest equity bull market in history, the gold bugs were thought of as crazy. The same arguments now appear brilliant and sage, reminding us never to confuse a bull market with genius.

  6. [...] Forecasting the forecasters Big Picture. Meta meta. [...]

  7. ancientone says:

    BR,
    Congratulations on your gig at the WAPO; you are someone who needs to be read more widely than your blog reaches. We need all the fact-based straight thinking we can find, from whatever source.

  8. Joe Friday says:

    Over the weekend, during a segment about looking back on 2011 and looking forward to 2012 on her syndicated ‘Wall Street Journal Report’ program, Maria Bartiromo said:

    Two of the smartest names in money and politics are my guests for this special discussion

    Who ?

    Former White House staffer and Reaganaut Peggy Noonan and PIMCO’s Bill Gross.

    That’s right, Loony Noonan and WrongWay Bill Gross.

    Both have an impeccable track record of being CLUELESS.