My friend and technical analyst colleague, Nicole Elliott has written a thought-provoking piece in the STA journal. You can read it HERE. I have long been a knocker of the value of economists and forecasters. It started my blog five years ago, What is the Point of Economists, which gave birth to some follow up as economists gave me more wrong forecasts to write about. The articles attracted media attention. Without meaning to, I got the reputation as an economist-hater. As someone who is calling the pot black? The difference is I, and my fellow technical analysts, accept the fallibility of what we do and how difficult it is to make forecasts. We also plan for failure. We are brutally judged on out forecasting successes in the funds and money we manage. Economists, in contrast, expound with unrealistic certainty and precision. The herd together, comforted by getting it wrong together. There seems to be no recourse in the media for getting thongs so consistently and wildly wrong. They’re are invited back to do it again.
Nicole’s point is, this is not without consequences. Referring to an article in CityAM she underlines the implications of people’s losing faith in the views and forecasts of economists. They join the likes of pollsters and fake news; not to be listened or paid attention to.
But this has costs, expensive ones, and no one is called to account. The media is particularly culpable here, herding instinct to the fore so that all new information that doesn’t fit the existing pattern is ‘a surprise’. I’m thinking especially of forecasts for developed market interest rates. For a good seven to nine consecutive years we’ve heard nothing except that interest rates are about to go up. Because they’re too low; because they’re not normal; because just because that’s the way of the world. Nonsense.
Not only have investors lost out in a secular boom in bond prices but their willingness to borrow money for long-term planning has been hampered. And still is as we are repeatedly warned that mortgage rates have never been this low, that car buying on tick has never been this high, that global debt stands at a record $215 trillion.
Even now, the mantra is for higher global interest rates. This is accepted wisdom and governments and institutions are accepting it. Except, the charts tell a different story. T
he down trend in yield is still in place in my humble opinion. Clearly also in Europe and testing but unbroken in the US.