Wednesday, August 15, 2007

Economic Forecasts / Track Record

Below are a list of my viewpoints on the economy and where we are heading in various areas. I have been far more negative than the talking heads throughout most of financial media, and thus far have been far more accurate. Many in America seem to live with their head in the sand, and it has cost them dearly.

General viewpoints of the economy: these were economic forecasts in a general sense hitting specific niches. Keep in mind these were mostly completely different than the "consensus" of economic thinking as in August 2007 we had just seen the first Bear Stearns hedge funds blow up, and the Federal Reserve had just made it's first rate cuts. Pundits said there would be no recession and that housing was just a "subprime issue". In October 2007 the market was at all time highs. Foreign investors were shuffling money into our faltering banks since "it can't get worse than this". By early December 2007 most were still in complete denial about the road ahead since the "data points" did not support my variant view to the downside. I am not sure how you "forecast" on "backwards" data but this is how most of the financial experts seem to do it.
  1. August 07 Thoughts/Roadmap (written Aug 31, 2007)
  2. December 07 Thoughts/Roadmap (written Dec 4, 2007)
  3. November 08 Thoughts/Roadmap (written Nov 14, 2008)
Outlier Predictions: in the spirit of hedge fund manager Doug Kass, I wrote a series of outlier events for the past 2 years. These are "out of the box" probabilities - the 2008 list had a >50% success rate.
  1. 13 Outlier 2008 Predictions (written December 2007)
  2. 13 Outlier 2009 Predictions (written December 2008)
Median House Price Forecast: - once more, as most of the pundits were in denial about the magnitude of what faced us, I wrote a simple analysis in December 2007 of where home prices were heading. Home prices had not yet (in history) fallen nationwide, so people assumed it could never happened. I called for a fall of 20%+ - with potential of 41%. We are well on our way there.
Sectors in Major Trouble: Throughout blog inception (August 2007) I've written how this was the going to be first consumer led recession since the late 70s/early 80s. Most economics/forecasters/stock pickers were denying any recession would happen - but those that acknowledged it was possible were using the wrong playbook. Many people running money in America are of age (similar to me) that they only experienced "corporate led recessions" of the early 90s and early 00s. They were using the wrong "playbook" - this was going to be something of a completely different nature: led by the consumer, not the corporation. I highlighted specific sectors throughout the consumer discretionary space that were in danger - retail, restaurants, Las Vegas, boating, RVs, sports, et al. (before it was fashionable to be negative on them) This is scattered in many posts from August 2007 forward but in April 2008 I wrote a summary
The Long Term Trend in America: This is probably my most read post - I don't focus as much about the "very long term road" facing America but I decided in late 2007 to put a smattering of my thoughts about the challenges facing the "bottom 80%" in the era ahead
What Will Our Recovery Look Like?: As people who were long in denial (most of them 'financial experts') finally succumb to the fact we are in a serious recession; these same people who denied any recession could happen now have moved on to talking about the impending recovery. I give my view on why the recovery will be substandard versus the consensus
Commodities in the Long Term: I am a long term bull on commodities as I believe global population growth & modernization will lead us to an era of consistent strain on resources. For a long time, the U.S. consumed the vast majority of resources with only a fraction (5%) of the world's population. The key to this was the majority of this planet was in deep poverty. As the economies of China and India bring online some 2.5 Billion people, with some fraction (even if it's 25%) of their people entering middle class in the coming decades - the strains on the world shall be enormous.
Miscellaneous Entries that Might Be of Interest: a hodge podge of potentially interesting posts
  1. See an article written about us in Barron's Magazine [A New Kind of Fund Manager] (July 28, 2008)
  2. Computers Run the Stock Market - Why Your Stock Doesn't React "Normally"
  3. What is M3 and Why do you Care?

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