Macro forecasting is an area where it is easy to be as right as the consensus, but very hard to be more right. This highlights that consensus macro forecasts provide no value—it doesn’t tell you anything everybody else doesn’t know so there is no information advantage.
Read Thinking About Macro by Howard Marks.
See also:
- Nobody grades an economist and they lack a published track record of their predictions to be believed.
Links to this note
-
I try to be careful about what I read in the morning as that has a way of setting the tone for the day. I stick to things that are informative or entertaining but don’t need a lot of energy to get into like a long-form essay.
-
Having to think about everything all the time would be impractical so people rely on other people to think certain thoughts for them. This happens all the time without us noticing or caring most of the time. For example, reading what an expert has to say about something is more efficient than deriving your own opinion from source materials.
-
Probability of a Recession (2023 Q1)
A Wall Street Journal poll of economists found that the probability of a recession in the next 12 months is 61%, down slightly from 63% from October 2022 and significantly higher than the 2022 Q3 roundup.
-
One question I find myself coming back to is whether or not macroeconomics is a useful source of explanations.
-
Surprise Should Come from the Upside Case Only
If your investments are good only because of future optimism, you will have surprises in the downside case. If your investments are good without optimism required then you will be surprised in the upside case.
-
Private Investing Avoids Visible Volatility of Public Markets
Private investment firms like venture capital and private equity are in the business of avoiding visible volatility of public markets. Because private assets don’t trade and investment managers go to great lengths to keep them from going down, assets appear to mostly appreciate (there are down rounds and losses, sometimes the chicken comes home to roost, but for the most part this is true) even when public markets are tanking.
-
Skepticism and Optimism in Markets
When it comes to markets, skepticism is warranted when optimism is excessive and optimism is warranted when skepticism is excessive.