Here at Cuffelinks, we are highly sceptical about the value of economic forecasting. There are too many variables, too many unknowns and too much speculation for it to be other than guesswork. OK, educated guesswork. So of course we like it when a highly respected analyst liberally sprinkles his article on forecasting with more self doubt than a three-legged antelope being chased by a cheetah.
Jason Hsu is the Chief Investment Officer of Research Affiliates, a global leader in asset allocation strategies. Jason issued his ‘Year-End Capital Markets Forecast’ here, and he is as well-qualified as anyone to predict the future. His paper if chock full of empirical evidence and tables, and it’s difficult to resist the conclusions. However, it is his use of cautionary notes advising of the perils of forecasting which this Off The Cuffe highlights:
“The only function of economic forecasting is to make astrology look respectable.” John Kenneth Galbraith
“I must remind you that forecasters use statistics as drunks would use lamp posts—for support rather than illumination.” Original quote is attributed to the famous Scottish poet Andrew Lang.
“Wall Street has predicted nine out of the last five market crashes.” This quote is attributed to the Nobel Laureate Paul Samuelson.
“My forecasts, like those of any other avid forecaster/soothsayer/talking head guru, come in only two flavors—lucky or wrong.” Jason Hsu himself.
And so say all of us.