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Goldilocks is Now "Officially Dead"

Thursday, September 13, 2007 | 07:30 AM

in Economy | Markets | Psychology/Sentiment

Last night, we had an open thread on the "Falling Dollar, Rising Gold, Oil, Inflation."

One of the articles I referenced for discussion was this WSJ piece, Forecasters Increase Odds Of Recession Over Next Year. If you click through to the full survey, a few things will pop out:

My man Larry Kudlow upped his possibility of a recession to 50%:

In related news, a small, closed casket funeral (mauled by Bears, not very pretty), was held for Goldilocks. It was a lovely ceremony attended by family and a few close friend. Goldilocks left behind no children, but she was admired around the world. In lieu of flowers, please send donations to the Bear Affection.

Does any of this really matter?

In a word, no.

I specifically detailed in the Folly of Forecasting how Humans are notoriously bad at predicting the future. And as I have noted in the past, as a group, economists make for especially lousy forecasters. They consistently over-estimate GDP and Job creation, they underestimate CPI and inflation. They have forecast exactly zero of the past 9 recessions.

As John Kenneth Galbraith eloquently stated, "We have 2 classes of forecasters: Those who don't know... and those who don't know they don't know."

The chart below makes this all too clear:

However, they do manage to extrapolate the trend on the 3 month note 90 days into the future . . . (nicely done!)

Source:
Likelihood of a Recession Is Given Better Odds
Economists Debate If Job Outlook Is as Bad as Feared
SUDEEP REDDY
WSJ, September 13, 2007
http://online.wsj.com/article/SB118954072982324112.html