Mea culpa — economic predictions.
Posted on 08. Jan, 2010 by scott in economic daydreaming
Today I look back at the risky predictions I made just two days ago (see here). Clearly I was no Nostradamus.
There was not a significant job increase in December, in fact the economy lost 80,000 jobs, which was more than most economists and analysts expected–but small consolation to me.
However, there were revised numbers for November and guess what? For the first month since December 2007 the economy added jobs rather than losing them. Not a big increase mind you, just a measly 4,000 jobs. But the fact that there was any increase at all is big news! And, the best showing in 24 months? Fantastic!
The Dow? Gosh, it didn’t make it to the 10,700 forecast, but it did go up about 190 points for the week and was up 4 out of 5 days. Closing at 10,618 means I was off a little (well 82 points) but the trend was up and that has been a pretty good historical forecast for the coming year.
The above mentioned predictions were on the whole wrong. I admit it. Due to my overly optimistic and hopeful expectations. But not really by far.
Here is the tally: My December job numbers off by 130,000 and November off by a measly 16,000. The DOW up only a bit on Friday and I wanted another 100 points or so. Oh, well.
Not so bad overall and pretty dang good in the stratospheric fields of economic and market estimating (to which I do not belong). Consider it luck.
But there is a greater issue here, a real lesson to be learned for the average Joe and Jolene out there.
It is that you simply can’t rely on the professional prognosticators. Whether they are economists or market analysts they are just not to be trusted.
You see, despite what you might here, all the predictions are just one person’s view and most of them have their own reasons (likely economic gain).
A straight forward thing to remember (and this could save you a lot of m0ney and grief in the future): at any given moment 1/2 of the economists (or analysts) will be wrong and less than 1/2 of them will be right. Go figure.
There are no formulas or equations or strategies that work all the time or even most of the time . . . over the short-term or long-term. If there were the majority of us would glom onto them and we would all be millionaires.
So, consider this some very direct advice (a warning if you will): don’t believe anything you here or read regarding the economy or markets.
To get ahead, or even to stay in-tune with what is going on, you have to listen to both (or however many) sides and then consider them with what you already know. Then make your own decision about what is right.
This lesson is valid for economics, politics, social issues, menu selection or anything else requiring human reasoning . . . especially for any predictions you may read here.
No simple answers folks.
Gotta do some homework on your own, and even then a decision may not be forthcoming and you will have to go with your ‘gut’ feeling.
Do not buy any stock because that CNBC circus act Cramer tells you to. Do not go out and buy a home right because Paul Krugman says that interest rates will go up tomorrow, and especially don’t quit your job and expect to get a better one soon because you hear Bernanke testify before Congress that the economy is on its way up.
All those people offer opinions only (and all are being paid to do so) and you are smart enough to have your own.
So do I. Some have cost me and some have profited. Life goes on. Like my 92 year old dad told me: you only have to be right 51% of the time to get rich.
We can only hope.
With that bit of advice I wish all of you a very happy New Year!
Thanks to gage skidmore for the photo from Flickr
3 Responses to “Mea culpa — economic predictions.”
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Barack Marx? The incredible leftward lean.
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Poverty -- try it sometime.
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Debt really is a burden.
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A 41 to 59 majority?
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Aren't we all?
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Francisco: I hope the best for your family and you Brother Ho...
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Michelle: I agree with the fact that we need to support the ...
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Roberto Vargas: I'm sorry, I got caught by the emotions las t...
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Steven Espinoza: S-O-C-I-A-L-I-S-M is not the answer! Going into de...
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Honors and Recognitions
Rodney Fife
14. Jan, 2010
The Economic Picture.
The Stock market has humbled many who thought they knew it all. There is no sure science in trying to choose wise investments. The elements of the stock market are not always foreseeable. However the market can still be used effectively to obtain success. You should never totally rely on someone’s advice in choosing investments. In choosing investments, one needs to do their homework. By reading and observing data about a particular investment you remove the emotional sensation to act. I would look at those who have contrary opinions of a company and see if those complaints are valid. Most important point of advice when you are playing the market is to use your head.
Economists remain perfectly confident that our great nation will turn around from this recession. The economic situation of the country, from my point of view looks grim. The influences of this view come from multiple sides and are far reaching. These include; government influence in the health insurance industry, proposed tax increases, slower than expected December sales and high unemployment.
Government influence of the health care sector will have lasting and harmful damage to small businesses. The small companies who do have health insurance for their employees will most likely not be able to maintain the coverage when the government intervenes. The small businesses will have an additional large expense to overcome. This will act as a large tax increase.
There are many tax increase ideas being thrown around the beltway in Washington. To increase taxes just as the economy is showing some life is ill advised. Businesses are running almost on empty. To tax them would be passed on to the consumers who are already feeling the pinch of the recession. December sales were down by 3 percent this year. This does not bode well for our economy.
While the picture may be bleak the U.S. Economy is resilient and will rebound if left to its own devices. The recovery will be quicker if Washington does not get in its way. Tax increases and stimulus packages are not the key for growth. Allow the free market to pick the winners and losers.
Nic Lovelace
15. Jan, 2010
I think one of the fears of many people is to make a prediction and to be wrong in that prediction. I appreciated the fact that you were wrong in your forecasting. Let me explain, it is obvious that you did your due diligence, you named a number of reasons as to why you felt the economy would be reported to be in a better state, nevertheless, you turned out to be incorrect in your prediction, big deal, everyone is probably most of the time. But what I think you have taught the reader is to educate themselves coupled with knowing the opinions of the analyst, or your broker, or your friend, but do your OWN research. And stay true to your own gut feelings and don’t be afraid to make a wrong decision, like you Dad said, you only have to be right 51% of the time!
Chris
15. Jan, 2010
Its interesting to think how someone with as much experience and knowledge in economics and in how the world turns, could be so off on his predictions of how the economy will look after only less than a week. Yet even more interesting that even though all his ‘reasons’ for his predictions were wrong and did not happen, his general prediction was fairly accurate.
In this article we are encouraged not to take any prediction for face value, and that all theories are to be chewed, savored, and then digested or spit out according to our own feelings or conscious. I raise the question, did the writer chew, savor, and digest the information he acquired and then share with us his feelings and then mislabel the ingredients to what he ate? He knew the flavor was good, or all that he took in about the economic situation was good, and predicted growth. And yet his entire list of ingredients was wrong.
To go along with what was said here, not all the evidences we have are accurate. But if we take in all that is said and analyze it, though we may not understand what is said, we will get a general feeling of how this will end up. And that is all that needs to be right at least 51% of the time.