Curse of Punditry
Fact : Even fairly good “predictions” are totally useless.
Last October (Ed : 2005) I presented - in front of a somewhat skeptical crowd at the Milan Drobny Conference - my “doom & gloom” and “hard landing” views about the US and global economy in 2006 that implied sharp downward pricing pressures for a wide range of risky financial assets.
The pundit updated his views in mid-july with the following advice and dire warning:
So, hedge fund managers: do truly stress tests your risk models for true nasty fat tail systemic events; May and June were nothing compared to what could happen next. So, I tell investors, paraphrasing Bette Davis in All About Eve: Fasten Your Seat Belts, It Gonna Be a Bumpy Ride. 2006 will indeed be the years when the disappearance of slosh liquidity and easy carry trade will erase the “poor manager’s source of alpha” returns (to quote the sarcastic expression of the IMF Chief Economist Raghu Rajan). Only, the true alpha-type gorillas of the hedge fund world – many of which are still lurking among the macro hedge funds – will stand up and advance ahead from the herding pack of beta primates.
Symbols on the picture:
Big hand:“Soft Patch” or the Beginning of a “Deep Murky Swamp”
Middle hand : dire warning - “sharp downward pricing pressures”
Small hand : dire warning - “Fasten Your Seat Belts, It Gonna Be a Bumpy Ride”
I wish an SEC-mandated disclosure accompanied all pundit forecasts: “The undersigned states that he has no idea what’s going to happen in the future, and hereby declares that this prediction is merely a wildly unsupported speculation.”