“A good forecaster is not smarter than everyone else, he merely has his ignorance better organized”

 

Lego Blocks sorted by color

How does one “predict” what is “going” to happen — they really can’t. The more knowledge one has in an area (in this context the economy or the housing market) the more that person is aware of past trends and present conditions and is better positioned to make their educated guess. But at the end of the day, it’s still a guess. So when you and I are asking: what is going to happen to the economy? What is going to happen to the housing market? I have a few thoughts:

1. Don’t listen to Realtors, don’t listen to newscasters, don’t listen to your neighbor who seems to always know everything – don’t listen to anyone who isn’t rooting their information in the research of a reputable ECONOMIST. Which brings me to point 2…

2. Listen to economists. If you aren’t sure of any reputable economists out there, anyone who’s stuff we share is reputable—but we can give you additional resources too, just give us a ring!

3. Christopher Thornberg—the economist we most frequently quote predicted the market crash in 2006. I remember going to one of his presentations that year and listening to his predictions—I thought he was crazy, everyone thought he was crazy. All of the other economists thought he was wrong, and then he was not. This is part of why I trust him so much—not just because he was the only one who was able to predict it, but because he shared and continued in sharing his predictions, even when no one would agree with him.

“To try to tease out what is likely to transpire in the economy in 2020, there are 5 basic questions to help approximate how much sustained damage will be generated from the public health related closures. If the answers suggest a lot of harm—then a slow recover will be in order. If they don’t suggest sustained harm, then there is no reason to think the economy won’t rapidly return to normal. When thinking through these questions, we do not necessarily arrive at the conclusion that there will be an extended contraction of the economy. “To try to tease out what is likely to transpire in the economy in 2020, there are 5 basic questions to help approximate how much sustained damage will be generated from the public health related closures. If the answers suggest a lot of harm—then a slow recover will be in order. If they don’t suggest sustained harm, then there is no reason to think the economy won’t rapidly return to normal. When thinking through these questions, we do not necessarily arrive at the conclusion that there will be an extended contraction of the economy. 

1. How long until the public health mandates are lifted?

2. How deep is the current shock to the economy?

3. What is government doing in the meantime to soften the blow?

4. How fragile/healthy was the economy when the pandemic first hit?

5. Will there be permanent significant changes in consumer behavior?”

– Christopher Thornberg

Thornberg suggests that as long as we don’t have answers to these questions above, no one can really predict what is going to happen.

4. No one knows what is going to happen: so whatever even the best of experts share, we hold with humility; and I would encourage you that predictions aren’t answers—they’re just our best guesses.

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