The author has been described by News Ltd as an "iconoclast", "Svengali", a pollie's "economist muse", and "pungently accurate". Fairfax says he is a "Renaissance man" and "one of Australia’s most respected analysts." Stephen Koukoulas concludes that he is "85% right", and "would make a great Opposition leader." Terry McCrann claims the author thinks "‘nuance’ is a trendy village in the south of France", but can be "scintillating" when he thinks "clearly". The ACTU reckons he’s "an enigma wrapped in a Bloomberg terminal, wrapped in some apparently well-honed abs."

Thursday, December 16, 2010

My best and worst calls of 2010

During the course of any given year, many so-called ‘experts’ capture attention by making big calls. Some of these predictions have little basis and are clearly motivated by a desire to galvanise media headlines. Few people hold them to account. With this in mind, I thought I would run through my list of the best and worst calls of 2010.

Best calls of 2010 (in no particular order):

* In his very first interest rate call, HSBC’s Paul Bloxham in anticipating the RBA’s controversial and surprising pause in October, and publicly reaffirming his view literally only a few minutes before the RBA’s decision was announced;
* The guy that gave the extra vote to Tony Abbott in the internal Liberal Party ballot that resulted in Abbo becoming Opposition Leader;
* UBS’s Matty Johnson for being probably the only strategist to pick both of the low inflation prints in the second and third quarters;
* ICAP’s Adam Carr, who never for a moment bought into the doomsayer’s relentless rhetoric, and was one of the few to correctly predict the recovery in North America and Aussie rate hikes in the second half of the year;
* ANZ’s team of economists for disclosing, and sticking to, their very unfashionable November rate hike call after the super-low third quarter inflation numbers;
* Westpac's Rory Robertson for getting Dr Steve Keen to march from Canberra to Mt Kosciusko after losing his bet on Aussie house prices;
* The RBA’s decision to normalise rates in 2010 ahead of almost all other central banks, although some might argue that it is an open question as to whether the November ‘double tap’ was justified;
* Yours truly in telling ABC’s Mark Scott (via Twitter) to replace Kerry O’Brien with Leigh Sales as the 730 Report anchor before K’OB had announced his retirement;
* UBS Chief Economist, Scott Haslem’s, AUD/USD year-end call of 97 cents, his September report outlining a thesis that retail was in structural decline, and his second half rate calls;
* RBS’s Kieran Davies and Felicity Emmett for forecasting the surprise spike in the unemployment rate in July from 5.1 per cent to 5.3 per cent based on ABS measurement changes;
* Rismark’s research group in anticipating the poor performance of the Australian equities market in 2010 in the face of the standard tsunami of bullish equity strategist sentiment;
* Anyone who put their money into a term deposit—on a risk-adjusted basis, fixed income investments have smashed Aussie and global equities over the last 30 years, as we have regularly reminded people;
* The RBA’s ‘cautious consumer’ thesis, which many economists incorrectly predicted would not last (although the RBA get to cheat by guaranteeing they are right via rate hikes);
* Goldman Sachs’ second bout of quantitative easing (QE) call, albeit that they got the size wrong (expected US$2 trillion vs. US$600 billion actual);
* The RBA’s confidence in the resilience of the Chinese and Indian economies throughout 2010;
* CommSec’s Craig James’s consistent ‘the-economy-is-softer-than-we-think’ line during the course of the third quarter (although the RBA would debate this);
* Kelly O’Dwyer MP’s sequence of questions that compelled the RBA Governor to say that a cost-benefit analysis of the NBN was critical;
* UBS’s Matty Johnson, who expected the ultra-low Q3 GDP print well before other strategists;
* News Ltd’s Terry McCrann going some way to reviving his ‘Shadow Governor’ moniker in forecasting a November rate hike, although most of his print peers seemed to pick it too;
* Rismark’s research group in forecasting the second quarter soft-landing in the Australian housing market;
* Anyone who picked the European Sovereign Debt Crisis, and the persistence of related sovereign ructions;

Worst calls of 2010 (in no particular order):

* Terry McCrann and every other economist that got the October rate hike, including yours truly, wrong (for the right reasons!);
* Nouriel Roubini and all the other doomsayers that predicted a double-dip recession and/or deflation in the US;
* Anyone banking on Tony Abbott self-destructing during the election;
* The countless equity strategists who forecast another bull market for Australian shares, as they do almost every year (AMP’s Shane Oliver, CommSec, Macquarie, Merrill Lynch, Zurich and UBS all said that the S&P/ASX 200 would be at 5,500 points or higher by year end);
* Anyone punting on an Australian sporting team winning;
* All of the eminent economists that predicted the implosion of (a) the Chinese economy and (b) the Chinese housing market;
* Any strategist who forecast that the Federal Reserve’s second bout of quantitative easing would reduce US interest rates and facilitate a depreciation of the currency, as was commonly claimed;
* The global hedge funds that went long Australian interest rate futures on the basis that they expected the RBA to cut rates as China imploded;
* Steve Keen’s forecasts for the Australian housing market;
* Jeremy Grantham’s decision to pick a fight with the imposing Aussie housing mafia (he has yet to formally respond to our offer to allow him to put a $100 million short position on the RP Data-Rismark house price index, although he did email my brother-in-law!).