Working Papers

The Running of the Bears

The top seven attention-hungry doomsayers:

The Running of the Bears only happens every ten years or so, so you’ve got to give the likes of Roubini, Whitney, Schiff, and Taleb a break for seeking to monopolize our attention while they’ve got it. After all, nobody likes a pessimist, and we’ll tune them out as soon as we’re brave enough to do so. That said, the depth of the current crisis suggests this bear market may last a little longer than the last few, so get used to hearing their names. Taleb’s got at least one more book in him about how smart he is.

Of course, even a stopped clock tells the correct time twice a day. If the likes of Whitney or Roubini want to truly cement their place in the history of financial prognostication, they will show the foresight to call a turn in the other direction, back to bullish conditions. Elaine Garzarelli made herself famous calling the 1987 crash. She never made another big one again.


posted on 12 February 2009 by skirchner in Economics, Financial Markets

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So, if I’ve already correctly called the timing of a market crash:


and now that I’ve made a call on the timing of a market bottom, after which I would expect stock prices to generally improve:


would that make me a better prognosticator than our modern-day Garzarellis if I do turn out to be right on the turning point call?

And if I do turn out to be right, what exactly would I win?

Posted by Ironman  on  02/12  at  04:00 PM

What?  No Faber?

While its true that the permabears have predicted 10 of the last 3 recessions, they did at least identify the problems and risks beforehand, and predicted the likely consequences.

That’s more than can be said for the “bubbles don’t exist” nonsense I read here during the 2005-2007 period.

Posted by .(JavaScript must be enabled to view this email address)  on  02/12  at  04:25 PM

Ironman, your predictions are at least model-based, which already makes you a better prognosticator on process grounds alone.

The doomers have no model.  Just opinions.

Posted by skirchner  on  02/12  at  04:31 PM

That would be “just opinions and multi-million dollar book contracts!”  All for being right once and wrong often….  I’m obviously going about this the wrong way!

Posted by Ironman  on  02/12  at  04:37 PM

Exactly, Ironman. I don’t want to knock you, but you’ve made a probablistic prediction on the market bottom, so how am I to know if you were right or wrong?

Posted by .(JavaScript must be enabled to view this email address)  on  02/12  at  04:48 PM

Easy, Rajat.  Given the probabilities involved, if I’m wrong, stock prices in the U.S. will continue their downward trend well into April 2009, rather than beginning a general increase in either February or March 2009.

Think of it this way - if a blackjack player is counting cards and the odds of the deck favor our card counter, they still lose when they’re dealt bad cards, no matter if the odds favor them.

Posted by Ironman  on  02/12  at  05:02 PM

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