“Predictors of 1929 crash see 65% chance of 2015 recession” that headline made an appearance on The Age and Sydney Morning Herald websites this week. Early on Tuesday it had low prominence, sitting midway down the page, but by about 3pm it had been moved to sit just below the sites’ mastheads.
The internet allows real time reader measurement. Moving the story up the page suggests the interest in the story must have been high. In fact, the story was really taking off everywhere around the internet. And it was a very catchy headline. Some people who predicted the 1929 crash forecast a 65% chance of a recession in 2015. Who wouldn’t read that?
And a 65% chance, no less! We’re grateful they were able to be so precise.
Digging into the story we find Jerome Levy was a guy who flogged his stocks before the crash of October 1929 and these days has a forecasting institution named in his honour, The Jerome Levy Forecasting Center.
Sadly Jerome’s no longer making predictions because he died in 1967. Luckily, his grandson David has seemingly inherited the family forecasting gene and is the one talking bad times for 2015.
David predicted the last financial crisis, which lends some authority to his calls and makes those headlines even more frightening, but in all of those stories telling of the wondrous Levy family forecasting, there were a few dud calls missing. They acknowledged Levy’s previous call of a 60% chance of a US recession in 2011:
“Conditions around the world look progressively more worrisome, and Washington seems to be gradually shifting its focus away from fiscal stimulus toward deficit reduction,” Levy said. “The prospects for a U.S. recession next year have edged up from a toss-up to around 60%.”
The US grew at 1.7% in 2011. So that prediction didn’t turn out, but the media left a few other clangers on the sidelines.
In an awkward piece of timing Levy gave an interview to Barron’s in 2009 where he talked of asset values continuing to contract and multiple recessions ahead. The date was March 9. For those who don’t remember, that was the exact day share markets around the world hit bottom and the bear market ended.
Finally, in an interview with Bloomberg at the end of 2012 Levy said it was time to be defensive. Yet by the end of 2013 Australian shares were 19% higher and global shares were up 48%.
See how this forecasting game works? Get a couple of notable predictions right and the media will keep giving you attention because you “might” be right in the future. They’ll even ignore most of your misses because it ruins the entertaining part of their story. And while today’s media might forget the litany of dud predictions out there, thankfully they’re being preserved by a thing called Google.
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