Just how hard is it to predict what the stock market and economy are going to do? And how much harder does it get when you use one the most unforgiving measures of performance in sports to tell if you're any good at it?
The unforgiving metric we use is the plus-minus statistic from hockey and basketball, where we gain a point if we're right, lose a point when we're wrong, and score a zero for when the outcome of a prediction cannot yet be determined, or in the case where we make multiple predictions that ultimately cancel each other out.
What makes this method unforgiving is that getting close doesn't count. We could miss predicting where the S&P 500 would average a month ahead of time by, oh say, just seven points, and we'll lose a point on our plus-minus score for that kind of near-miss.
Adding up the totals of hits and misses over time, if our predictive ability is no better than the random outcome determined by a coin toss, our plus-minus score will drift toward a value of zero. If we're better at making predictions than simple randomness would suggest, then our plus-minus score will grow higher in value over time. If we're wrong, then our plus-minus score will fall in value. If we're really bad, then our plus-minus score will plunge into deep negative territory!
Since January 2008, we've posted some 60 posts in which we've made 69 distinct predictions, mostly having to do with where the stock market would go but also covering the direction of the U.S. economy, labor markets and in this issue, how long a certain box office bomb would last in the theaters!
So how did we do in the last three months since our last update, when we finally broke the double-decade mark and achieved a plus-minus score of +20?
Well, let's just say we're now in Jack Bauer territory! The table below updates the changes from the "too soon to tell" to "decided" status, the carry-overs where we're still waiting for the call and what we've done lately!...
| Political Calculations' Plus-Minus Score Update, 26 April 2010 | |||
|---|---|---|---|
| Date | Prediction | Outcome | +/- Score |
| 13 February 2009 | We predict that significant changes in the U.S. income tax are in the works given the kinds of questions that members of the U.S. Senate (or their staffs) are asking us through Google. | +1 | |
| 13 August 2009 | We make fun of 47 economists for predicting that the U.S. recession would end in the third quarter, based on the "Cash for Clunkers" program. We point out that the dividend futures data for the S&P 500 has been saying the recession would be over in 2009Q3 for months, long before C4C even became legislation! | Too soon to tell. This prediction looks pretty likely, but we'll have to wait for the NBER to get around to declaring the date of the end of the recession. Update: Looking more and more likely. | +0 |
| 8 September 2009 | We suggest that teen employment figures might soon begin to improve provided no further minimum wage increases are in the works. | Too soon to tell. Since the data comes out monthly, it may not be until early January (when December 2009's jobs data is released) where we'll have an answer. Update: At this writing, December 2009's jobs data indicates that teen employment figures are continuing to stabilize, or rather, have stopped their descent, which would indeed be an improvement. Update: We can confirm that teen employment figures have stabilized and are improving, most dramatically with respect to older workers (amazing what happens when minimum wage increases stop!) | +1 |
| 21 December 2009 | Using incomplete data for the month of December 2009, economy would dip in the second quarter of 2010, with a slow recovery afterward. We anticipate that meaningful growth in the number of jobs would likely begin with the third and fourth quarters of 2010. We anticipate that the NBER will declare the recession they found to have begun in December 2007 to have ended in the third quarter of 2009, but we make a case for 2010Q2 as a more realistic alternate. | Too soon to tell. It will be a while before we get a full confirmation for these predictions. On the potential plus side for us, different branches of the Federal Reserve have used their own models for predicting what the NBER will do to find that July 2009 is the month they will most likely declare to be the ending date for the recession. | +0 |
| 4 January 2010 | Using all the data through the end of December 2009, we updated our preliminary forecast for January 2010 to put the average level of the S&P 500 between 1131 and 1165. | Too soon to tell. The month's not over yet, but so far, we're on track! Update: Or we were, until the Obama administration flubbed Federal Reserve Chairman Ben Bernanke's re-nomination process. We hate to have to score this as a miss, seeing as we were only off by 7 points with the S&P 500 closing the month for an average of 1124, but the plus-minus scoring system is very unforgiving (which is why we use it!) | -1 |
| 1 February 2010 | We rebound from the Bernanke Correction by predicting that the S&P 500 would average between 1084 and 1111 in February 2010. | The average for the S&P 500 for February 2010 came out at 1089.16 - we recover our pride! | +1 |
| 4 February 2010 | Apparently, forecasting where stock prices will go isn't enough for us! We resuscitate our "Modified Limo" method for predicting what GDP will be and use the finalized data from the third quarter of 2009 to anticipate that GDP would be finalized at a value within 2% of 13,284.9 billion chained 2005 U.S. dollars in for the fourth quarter of 2009. | If we go by Table 3 of the BEA's final 2009Q4 GDP estimates, GDP for 2009Q4 was $13,149.5, which means we were only off by 1.0%! | +1 |
| 1 March 2010 | We identify March 2010 as being when investors would shift their focus forward to a farther point in the future, and calculate four possible scenarios based upon the available dividend futures data. We flat out state we don't know which one will apply and won't until after March. | As it happened, the data strongly suggests investors shifted their focus to the future as defined by the dividend futures contract for the second quarter of 2010. We had forecast a range of 1106-1163 for the month using the futures data for that quarter, where stocks actually averaged 1151 for March 2010. We're scoring this as a zero since it's pretty clear we weren't making any sort of prediction, but were instead describing what would happen "if"! | +0 |
| 24 March 2010 | We examine Hollywood's gluttony for box-office bombs where making anti-war movies are concerned, and predict that Green Zone life expectancy in movie theaters would be either 5 or 6 weeks long! | Green Zone's last day of business at the box office was 22 April 2010, six weeks after it first opened. It died as it lived, unwatched and unloved…. | +1 |
| 31 March 2010 | Using the finalized data for the fourth quarter of 2009, we project GDP for the first quarter of 2010 will be within 2% of $13,276.5 billion chained 2005 U.S. dollars! We even give nearly 70% odds of GDP falling between $13,136 and $13,417 in the first quarter! | We won't know the answer until the BEA releases the finalized GDP data at the end of June 2010. | +0 |
| 1 April 2010 | Recognizing that thanks to the extraordinary market conditions of a year ago that our standard method for predicting stock prices would be off, we guesstimate that stocks will reach a level between 1233 and 1290 in April 2010. More significantly, we temper that optimistic forecast by predicting that the average of stock prices would fall below those levels. | The month's not over yet, but we think seeing 1233 in April 2010, the bottom of our forecasted range, will be unlikely at this writing, although we're within 1.5% of it. We're scoring that prediction as a miss, but thank goodness we were smart enough to take the under, which nets our plus-minus score a goose egg for this batch! | +0 |
Previously on Political Calculations
The following links will take you to our previous prediction outcome reports. You can get the most recent status updates by clicking the "track record" tag at the bottom of the post.
- Plus-Minus for Predictions - 16 April 2009
- Our Plus-Minus Is Now Seventeen! - 16 July 2009
- Predictions Plus-Minus Update - 15 October 2009
- Predictions Plus-Minus Update - 21 January 2010
- Predictions Plus-Minus Update - 26 April 2010
Labels: forecasting, track record
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