Sunday, 16 February 2014

Politics, Economy, Society – five years on

Having soldiered on as a blogger for half of a decade (fifth anniversary officially falls tomorrow), a tenure few can boast about accomplishing, I can dub myself an unfaltering blogger (blowing my own trumpet). Instead of posting some tedious musings on hardships and sacrifices in blogging, I decided to review all my posts tagged ‘predictions’ and ‘forecast’, to check, with hindsight, their accuracy. As the list below demonstrates, I was an active forecaster during first two years of blogging and then perked up in last quarter of 2013.

18 March 2009 – mentions forecasts of GDP growth in 1Q2009 of 0.5% y/y and encouragement to speculate against the Polish currency. In fact the Polish economy expanded by 0.8% and PLN hit its many years’ trough one month earlier.

25 March 2009 – makes a reference to BNP Paribas forecast of EUR/PLN conceivable reaching 5.40. It has not climbed to even 5.00 thereafter…

13 April 2009 – a bearish post, completely wide of the mark. My outlooks of stock market reverting to a downward trend vehemently have not fulfilled. 2009 witnessed one of the most vigorous bull markets in the history, largely driven by the scale of precedent decline (what goes down must come up) and flood of cheap money, pumped in by central banks.

24 April 2009 – IMF’s prophecies of doom have also not come to a pass, neither in 2009, nor later in 2012 or 2013… The Polish economy has not contracted in any single quarter.

4 August 2009 – again I expressed a bearish stance on the stock market, hoping for a correction allowing me buy stocks at cheaper price. In subsequent months stock market moved most upwards…

29 August 2009 – interesting to look back on the musings on shape of the 2008/09 recession in retrospect. In Europe, while the financial crisis is still not over (had the end of it been proclaimed, we would have to see different-than-zero interest rates) there was a double-dip recession, with the second bottom of W-letter touched at the end of 2012.

2 September 2009 – these bearish postings are getting boring. Yet, they reflect my key investment strategy I use until today. I wait for a local trough in corrections to buy up shares near lows and sell them a few weeks later with double-digit (in percent) profits. Predictably, the forecast was a miss.

14 October 2009 – no stock market tumble was observed, decreasing my hit ratio, but after the first early spell of winter, no snow was seen in Warsaw for 2 months.

16 December 2009 – here I was more successful – the stock market correction I waited for ensued in early February 2010, PLN generally appreciated against other currencies, Mr Bernanke was elected for his second term as CEO of the money-printing factory.

5 January 2010 – I mentioned a forecast of long and snowy winter. Generally it proved true. In January 2010 temperature dropped to –23C and in mid-February snowcover reached 53 centimetres in Warsaw. The last gasp of winter was felt around the half of March.

30 January 2010 – I estimated odds of failure of my bearish conjectures at 35%. Was much enough to prove me wrong.

5 February 2010 – post compiled on the second day of an abrupt stock market decline. Yet the guess the bull market was just a correction in a long-term downward trend was flawed.

19 April 2010 – I foresaw a crash on stock market, which in a soft version ensued three weeks later, in the wake of threat of Greek default.

6 November 2010 – makes a reference to reliability of long-term weather forecasts. Winter in 2010 was to hit early, while November 2010 was extraordinarily warm. The long-term forecast of winter 2010/11 generally proved right, except for late advent of spring.

13 November 2010 – here I mentioned what I had heard of a projections of super-crash in late 2014. It is too early to judge whether this forecast was correct, but I today I would not dismiss it out of hand.

19 January 2011 – bolstered up by strength of the Polish economy, I put too much faith in the Polish stock market. In the short-term indeed the Polish equities performed well and the blue chip WIG20 index peaked in April 2011 above 2,900 points, but then, in August 2011 plummeted and at the end of the year was well below expected 3,200 points.

2 October 2011 – another chance to confront long-term weather forecasts with reality.
- October was chilly – hit.
- November was generally cold, but not wet – partly hit,
- December was anything but frosty and dry – miss,
- January also neither very frosty, nor dry - miss,
- February instead of above-average temperature brought the longest cold snap since 1987, but its last days were balmy – miss,
- March was spring-like – hit.

1 January 2012 – contains a whole bulk of predictions for 2012:
- financial market were quite wobbly indeed – hit,
- fire in PIGS countries was put out, bondholders of Greek government debt had to take on board a loss of 53% of face value of securities they held, but Greece was not forced out of the eurozone – miss,
- winter did not stay mild and the lowest temperature was –23C rather than –16C – miss,
- in 2012 indeed Poland’s economy expanded slower than in 2011 and economic performance, measured by GDP growth, was worse than in early 2009 – hit,
- property prices kept going down – hit,
- no economic disaster struck us – miss, fortunately, albeit markets were very shaky and investors fearful in 2Q2012.

1 September 2013 – had a go at dream interpretation. In retrospect, what I thought could send misery on me, left no mark on me, I was not riding for a fall.

6 October 2013 – an extensive and informative (I dare to claim one of my best) post on prospects of the property market in Poland. 3Q2013 figures point at surge in demand and uptick in prices. I suspect we have to wait until data for 2Q2014 (to see a full year of upward trend) to judge whether last revival is just a temporary rebound, or the trend has sustainably reversed.

1 December 2013 – also to early to evaluate accuracy of the forecast. Second half of January 2014 saw a considerable correction on developed stock market, but clearly there are no reasons to speak about any crash. Needless to say, QE tapering might clamp down on the bull market that has lasted for five years.

I sadly and honestly have to admit my hit ratio over five years was low. I would justify my poor performance by psychological bias in forecasting. I envisaged what was favourable for me, not necessarily the scenario grounded in cogent economic reasoning.
I thank all the ardent readers of the blog for their endurance and patience. Take care!


Michael Dembinski said...

Baysian inference - the greatest temptation facing forecasters :)

Anonymous said...

I read it but it didn't help!

Bart - duzo congrats on your 5th anniversary!! May you continue for many years to come.