Morning Jog

Throwing Darts

This week, the International Monetary Fund (IMF) published its semiannual forecast for global economies, cutting the expected growth rate for 2019 from 3.7% (projected last October), to 3.3%. You can check off all the usual suspects for the tempered outlook: the slowdown in trade, tariffs, declining business confidence and increasing political uncertainty.

Granted, a 3.3% growth rate, even if lowered from a rosier outlook, will be a respectable outcome…considering the issues above.  However, if you’re making investment decisions as a result of this forecast – don’t. Unfortunately, for all the money and brain power expended on these sophisticated economic forecasts, their utility for investors is no better than that of the ‘investment guru’ newsletters warning about the eminent collapse of the US dollar and hawking gold coins.

The Financial Times looked at a 27-year period of IMF forecasts made in October for the upcoming year. An average of five economies were predicted to contract every year by the IMF; the actual number that did? 26.


(Source: Financial Times)


The IMF itself conducted a comprehensive analysis on the accuracy of economic forecasts, evaluating GDP forecasts for 63 countries, between 1992 and 2014. I was floored when I first heard the number: out of 153 recessions that occurred during this period, economists successfully predicted five. Private economists were equally off the mark as their official agency colleagues.

The somewhat reassuring conclusion is that forecasts tend to become more accurate as the year progresses (duh!), and by April economists generally get the direction of growth for that year right (but still miss the magnitude). So at least the forecast for this year is with a plus sign.

But the next time you read an attention-grabbing headline of the smartest sounding forecast for doom or boom, keep this in mind:


Nobody knows anything… Every time out it’s a guess and, if you’re lucky, an educated one

-William Goldman


Uber’s highly-anticipated Initial Public Offering is drawing close. It expects to raise $10 billion, at a price that values the company between $90 – $100 billion.

Interestingly, in its offering prospectus filed with the SEC, the standard pages discussing the Use of Proceeds from the IPO have been replaced with one photo:

 


(Source: National Science Foundation)


Enjoy your weekend.
Alex