Forecasting is Tough…Especially in the Future (Yogi)

Maybe it’s an age thing, but I find myself watching the weather with greater enthusiasm than just a few years ago. Comfort, appropriate dress, care for the kids and a occassional change of plans if a real outlier of expectations occurs. While these reasons are convenient and helpful on a personal level, on a professional level the importance grows exponentially for myself and our team both as a receiver of forecasts and a  careful verbalizing of them, such as last weeks article, which so far has been correct but has perils similar to putting our necks on the chopping block.

In this recent Economist article, they cleverly reviewed the IMF (International Monetary Fund) estimates for world GDP growth. The dark blue line is actual with the others being estimates at different time frames. It is worth mentioning, that the IMF has access to the best and brightest minds born from many of the respective domiciles, said another way, they are darn good!

The Bad News:

The total error is greater than the actual forecast in certain cases.

The Good News:

The direction of the forecast is pretty accurate.

Simplified in non-financial terminology, according to this Economist study, when the weather man calls for rain, it usually rains. The amount of rain called by the weather man….well let’s say it is not so accurate.

We try to keep this in mind both for our internally reviewed and researched forecasts and also for OUR verbalized and  espoused forecasts. It is worth doing the same, as very few forecasts are 100% accurate…..Especially in the Future.. (Thanks Yogi)

Have a Great Day!

JK

214-706-4300   http://www.jkfinancialinc.com

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