When Soothsayers Go To Camp

Every July, some of the brightest minds in finance and economics (that are male apparently) gather in some rugged out of the way hideaway to fish and talk economics and stocks. Organized by Richard Kotok of Cumberland Advisors, the gathering is now known as Camp Kotok. The theory is to getaway from the noise, neuroticism and smog of New York to clear the mind and reinforce what they all believe the direction of the economy is heading toward. During the time, the group puts together forecasts of some key economic variables (Their level of sobriety cannot be verified).

Last year I noted their predictions for 2015. Which I’ve listed below, with the actuals in parenthesis.

  • US GDP will be 2.8 percent (Actual was 2.3 percent - Wrong)
  • Fed will successfully manage exit from QE without tipping a canoe (Fed tapered itself out of QE with stock prices continuing to rise – Correct)
  • Unemployment will be down to 5.7% in June 2015 from 6.2 in June 2014 (Unemployment fell further to 5.3 percent – The trend is down so I’ll give it to them)
  • Inflation will be under control at 2.5 percent (Inflation went down to 0.1 percent – Wrong)
  • Average forecast for S&P500 was 1927 flat from 2014 level. Taking out one outlier, expect 4% gain or 2010 (S&P 500 closed up 5.21 percent as of June at 2063 - Correct)
  • 10 Year Treasury yields would rise to 3.02 percent (10 Year Treasury now at 2.17 – Wrong)
  • Gold and oil both look flat (Gold down 11 percent – Wrong, Oil down 49 percent – Very Wrong)

The Soothsayers were off on 5 of the 8 indicators. Not horrible. Not great either. It's not about competency either. It just goes to show us that predicting the future, even for people who get paid to predict the future and have a lot of letters after their name is very hard to do. Don't get me wrong. The Soothsayers are very bright people. It's just hard enough to be right once. Consistently? Forget it. It's a fools game. 

Fear not though, there's opportunity in them predictions. Often enough these type of predictions when established by a critical mass of constituents can create an opportunity to take the other side of the trade. So I always try to keep an eye on what the Consensus is thinking and try to capture them in my Investor Consensus Blog