Financial exec swings and misses with 2011 econ predictions
COMMENTARY The danger with making predictions at the start of the year is that someone will come along and check them at the end of the year. Byron R. Wien, vice chairman of Blackstone Advisory Partners, has just released his predictions for 2012 - the 27th year he has issued predictions - so we thought it would be a good time to go back and see how he did last year.
It ain't pretty, folks.
Of the 14 predictions he made about last year, he got just five right. While that doesn't sound so bad, some of the things he missed on -- the housing market, overall U.S. economy and EU financial crisis -- were so wrong they should have been given extra credit. Don't quit your day job, Byron.
1. U.S. Gross Domestic Product rises close to 5 percent, driven by improved trade and capital spending in addition to stronger retail sales.
WRONG: While the fourth quarter GDP numbers aren't in yet, it would take a miracle or three to get them up from the third quarters projected GDP growth of 1.8 percent.
2. Unemployment drops below 9%.
CORRECT
3. Yield on 10-year U.S. Treasury notes gets close to 5 percent.
WRONG: 5 percent is clearly a cursed number for Mr. Wien -- current yield is 2.52 percent
4. Spreads with corporate fixed income securities narrow.
CORRECT
5. The Standard & Poor's 500 rises close to its old high of 1,500.
WRONG: S&P closed at 1,277 yesterday.
6. "A broad range of sectors participate, but telecommunications and utilities lag. With earnings improving, valuations seem low and individual investors return to equities for the first time since the financial crisis. Merger and acquisition activity becomes intense and the market reaches a blow-off euphoria. Stocks correct in the second half as interest rates rise."
WRONG: Ummm no.
7. Although inflation remains benign, the price of gold rises above $1600 as investors across the world place more of their assets in something they consider "real."
CORRECT: $1,614 as of today.
8. China manages the value of the renminbi aggressively to keep the growth of the economy below 10 percent and prevent consumer prices from increasing above the 4 - 5 percent range.
CORRECT (Although you could argue that growth and inflation are down because of the bursting real estate bubble.)
9. The move is viewed as a precursor to the world-wide adoption of a basket including the renminbi as an alternative to the use of the dollar as the principal reserve currency.
CORRECT Sort of. China says it wants to make the renminbi (yuan) convertible but hasn't enacted currency reform needed to do that.
10. The price of corn rises to $8.00, wheat to $10.00 and soybeans to $16.00.
WRONG: Corn: $6.58, wheat $7.625, soybeans: $12.70
11. "The housing situation improves. Although the inventory of unsold homes remains high, the oversupply is drawn down substantially, contrasting with an increase in 2010. The Case-Shiller gradually heads higher and housing starts exceed 600,000."
You're joking, right?
12. Oil rises to $115 per barrel.
WRONG: Oil is $103 a barrel.
13. President Obama accelerates the withdrawal of most military personnel from Afghanistan to the end of 2011.
WRONG: Although they are being withdrawn.
14. "The European financial crisis becomes less of a concern."
Wait, you're serious?
Well, as we Cubs fans say, "There's always next year."
(All prices listed are current as of 1/4/12.)
