Readers of last month’s VFTD will recall our discussions about unpredictability. In that same piece we made reference to our upcoming outlook for 2015. Having boxed ourselves into this forecasting corner, we began collating our thoughts and were rather taken by a recent article, from the Wall Street Journal, titled “Lessons From a Year of Market Surprises” (30th December 2014). The following extract neatly sums up the dilemma we face;
‘The Nobel laureate and retired Stanford University economist Kenneth Arrow did a tour of duty as a weather forecaster for the U.S. Air Force during World War II. Ordered to evaluate mathematical models for predicting the weather one month ahead, he found that they were worthless. Informed of that, his superiors sent back another order: “The Commanding General is well aware that the forecasts are no good. However, he needs them for planning purposes.”’
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