Posts filed under “UnGuru”
Paul Farrell responded to Wharton School prof Jeremy Siegel’s most recent predictions for the Dow by year-end 2013, who said: “My Dow 17,000 projection may turn out to be too timid.”
He channels William Sherden, author of “The Fortune Sellers: The Big Business of Buying and Selling Predictions.” Sherden decided to test the accuracy of leading forecasters over a multidecade period. His conclusion: Forecasters stink.
Farrell summarizes Sherden’s findings in 11 bullet points:
1. Economists’ predictions are no better than guesses
2. Government economists often worse than guesses
3. Long-term accuracy is impossible
4. Turning points cannot be predicted
5. No specific forecasters are better than the rest of pack
6. No forecaster was more expert with specific statistics
7. No one ideological orientation was better
8. Consensus forecasts do not improve accuracy
9. Psychological bias distorts forecasters and their forecasts
10. Increased sophistication does not improve accuracy
11. No improvement over the years
Its worth spending some time reviewing the entire article.
Dow 17,000? Main Street lambs led to the slaughter
Bullish predictions drive Wall Street’s casino
Paul B. Farrell
MarketWatch Feb. 13, 2013
Pundit tracker is an interesting new site that proclaims its mission as bringing accountability to the prediction industry.
The site notes the Media’s lack of institutional memory. This creates perverse incentives — Pundits learn that brash predictions generates news coverage. If it turns out that they are wrong, well, it hardly matters, as no one ever remembers or calls them out on it. On those occasions when the blind squirrel finds the occasional nut, they can selectively tout that correct call for self-promotional purposes. The entire cycle then repeats.
I am especially keen on these Pundit excuses:
Too early: “I was simply too early; just wait and see, that stock market crash is still coming.” (see: Broken Clock Pundits)
Black swan: “Sure, our credit rating models failed, but who could have predicted that housing prices would fall across the country at the same time?”
Close enough: “Hey, I said the stock market would go up more than 10% and it went up 8%. I was basically right.”
Self-negated: “It was our own beliefs and actions that spared the world from catastrophe.” (see When Prophecy Fails)
Hedged: “I only said that it could happen.” (See: The 40% Rule) — note: when pundits are correct, they strangely fail to mention the hedge.
Pundit tracker wants to create a permanent catalogue / track record for the punditocracy’s predictions.
It is an interesting site that has the potential to correct some abuses. It will really have an impact once the media starts to use it in questioning or even booking their guests.
More from the site after the jump…
Interesting discussion by Think Tank contributor MacroMan, who retells a story about Yale Professor Robert Shiller: We asked him once to visit us in our offices and the meeting took place the day after then Fed Chairman Alan Greenspan’s famous Irrational Exuberance speech in December 1996: “But how do we know when irrational exuberance has…Read More
This is the third or so in a continuing series of WTH/WTF posts where we look at famous wealthy folks’ investing errors, and wonder just WTF is going in their personal finances. Our goal: Learn from other people’s mistakes. Today’s WTF?! celeb is 42 year old golfer Phil Mickelson. Phil is “mad as hell about…Read More
Distinguished Lecture by Nobel Laureate Prof. Joseph E. Stiglitz
Occasion: Investiture ceremony of Prof. Joseph E. Stiglitz
Date: 04, January 2013
Venue: University of Hyderabad, India
Speaker: Prof. Joseph E. Stiglitz, Columbia University
Topic: Macro Economics in crisis: An agenda for Rejuvenating the discipline
About the speaker:
Joseph E. Stiglitz, a Nobel Laureate in Economics (2001) and University Professor at Columbia University, is one of the most eminent economists who has explored and pioneered many pivotal concepts and theories in Economics.
His Works have helped explain several critical market circumstances, globalization and economic crises in several parts of the world.
He has also authored several books in Economics. Some popular ones being, “The Price of Inequality”, “Globalization and its Discontents”.
As Ben Walsh of Reuters mentions, the Tim Geithner Legacy Project is underway. There was a large post by Neil Irwin in the Washington Post, arguing that he’ll be one of the most important Treasury secretaries in history. Joe Weisenthal argues he’s done a great job guiding us out of the recession compared to other countries. As there will be several pieces like this in the weeks ahead, I want to make some general criticisms. This will probably go across several posts.
Joe Weisthnal notes that our recovery has been better than other financial crisis recessions.
Four things about the chart. First, I’d note as a matter of the empirical research that “financial crisis” isn’t a coherent unit of measurement for these purposes. If Finland was going to have a recession three-times worse than the United States, it would also have a “financial crisis” at some point. But that doesn’t mean the recessions are identical. This idea that financial crises creates long recessions when long recessions really create financial crises is the weak part of the whole Rogoff-Reinhart argument. So I’m not sure these are equal starting points for a comparison.
Each year, David Weidner of MarketWatch puts out a list of folks in finance that you should pay no attention to.
This year’s list is out, and its a doozy:
1. Jamie Dimon
2. Sam Stovall
3. Jim Cramer
4. Bill Miller
5. Michael Grimes
6. Sheila Bair *
7. Vikram Pandit
8. Greg Smith
9. Meredith Whitney
10. Occupy Anything
11. Glenn Hubbard
12. Robert Diamond
13. Mitt Romney
* Bair was on his Do Not ignore list.
(2012′s list is after the jump.)
Who did he miss this year?
Q&A: The Price of Paying Attention (November 3rd, 2012)
13 Wall Street voices to ignore (or not) in 2013
MarketWatch, January 2 2013
I don’t know about you, but I am bored to death with the Fiscal Cliff obsession. This may be the signle greatest example of excess media hype since Y2K. We find out how devastating this will be very soon. I do not believe history will look back kindly at how many people and institutions handled themselves over this period. (Pathetically irresponsible are the first words that come to mind).
What is causing all the sturm und drang? Is this really a Mayan apocalypse of expiring tax breaks and sequestered spending cuts.
Hardly — here is what we are discussing, in terms so simple even a congressman could understand it:
• Bush tax cuts expire; tax rates revert to Clinton-era levels. Recall this was originally designed to get rid of that pesky surplus (mission accomplished), and to expire in 10 years. It is now year 13;
• Top marginal rate go from 35% to 39.6%; Middle-class tax payers see increases of ~$2,200 per year;
• Payroll tax cut stimulus expires; Americans will go back to paying 6.2% up from the current 4.2%, this rate applies to the first $113k of income.
• Unemployment insurance expires for 2.1 million long-term unemployed, with another 1 million Americans scheduled to see those benefits terminate Q1 2013.
• Sequestration kick in. $1.2 trillion in cuts spread out over the next decade. (That’s hardly a cliff after all).
• Specific Savings: $492 billion come from Defense; half from discretionary programs (non defense, non entitlements). That adds up to $984 billion — the balance of $1.2 trillion are interest rate savings on the smaller debt.
• Annual Spending Cuts: The specific savings amounts to $55 billion in Pentagon cuts plus $55 billion from non-defense discretionary programs.
• Alternative Minimum Tax patch expires. A messy set of repairs to that operates to fix the simple error of the AMT not being inflation adjusted since 1969.
• Medicare doctor payment adjustments: Another annual fix-the-original-error expires tomorrow. Without this, Medicare doctors get a 26.5% Medicare payment reduction.
All Most of these will be phased in over the next year and decade. For example, the tax rate increase won’t have to be paid until you file your taxes in April 2014.
None of these are simple or painless, but they hardly amount to the world ending depression many are claiming. It will be a minor drag on the economy at a time when it is still soft, not yet fully recovered from the financial crisis.
All of the above is the opposite of classic Keynesian stimulus — raising taxes and cutting spending during economic weakness (then reversing it during strength). Those of you who are anti-Keynes should therefore be rooting for this.
Falling Off the Fiscal Cliff
Dallas Fed, December 2012
The Fiscal Cliff: Absolutely everything you could possibly need to know, in one FAQ
Suzy Khimm, Ezra Klein, Dylan Matthews and Brad Plumer
Washington Post, December 3, 2012
The Guide to Going Off the Cliff
Nation, December 29, 2012