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Dow Forecasts: What newsletter editors and weather forecasters have in common

Posted December 12, 2007

"Like the followers of a doomsday cult, the forecasters of financial doom are as flexible as Gumby at a Kama Sutra tutorial when it comes to accommodate ever new deadlines for the imminent great crash. And like their colleagues at the weather center, they stand a good chance that they'll get it right eventually." — J. Christoph Amberger

by J. Christoph Amberger.

Baltimore — (TFN): So far, 2007 has not been a great year for forecasters of catastrophe and collapse. Hurricane season officially ended a few days ago. For the second year in a row, the weather experts had predicted that horrendous storms would slam the United States. For the second year in a row, they were dead wrong.

Apparently, the mathematical models that enable the global climate specialists to accurately plot and predict weather patterns twenty to fifty years out still leave something to be desired in the short term.

National Oceanic and Atmospheric Administration scientists are now reviewing a set of dynamic weather patterns that yielded the lower-than-expected hurricane activity. I think those financial analysts should join them whose typical knee-jerk reaction is to bid oil prices up when they hear the experts oracle… usually in February.

No time to read? Just keep multi-tasking as you listen to the video! 

The science of predicting storms appears to be just as accurate as the method of predicting U.S. GDP growth. The Commerce Department, too, was recently forced to revise its numbers for third-quarter gross domestic product growth. But where the weathermen had to lower their bids, the bean counters had to ante up.

The upward revision was due to substantial increases in private inventory estimates and exports — and a downward revision to imports. Both are caused in part by the weak dollar, which has made American assets and goods dirt cheap for those paying in euros and pounds and Canadian dollars.

Stock market collapse postponed 

Inflation-adjusted U.S. GDP increased at an annualized rate of 4.9% during the third quarter. That, my friend, is about twice the growth rate of the current European economic "resurgence." It is bigger than Japan's economic revival. And it accounts for both the sub-prime crisis and residential building collapse, which deducted over a percentage point from the numbers.

That hasn't discouraged those predicting doom and gloom for the U.S. economy at all. After all, what's another quarter of being wrong when you can look back on twenty years of missing the target?

The predictions for the rest of the year continue to be undauntedly bearish — calls for the demise of the dollar and hence, further elimination of the trade deficit notwithstanding. And despite record retail sales this holiday season, analysts are calling for Q4 GDP growth to come in at under 1%.

Like the followers of a doomsday cult, the forecasters of financial doom are as flexible as Gumby at a Kama Sutra tutorial when it comes to accommodate ever new deadlines for the imminent great crash. And like their colleagues at the weather center, they stand a good chance that they'll get it right eventually.

But living in constant anticipation of catastrophe can surely cramp your style. Only when it comes to your investments, it is far more expensive than living year-round in a hurricane-proofed house with boarded up windows.

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Posted by J. Christoph Amberger · Filed Under US Stocks and Markets 

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