We've been known to poke fun at economist Stephen Roach for some time. It's not that he's been a one-note piano (and that note is bearishness), but for awhile he always wrote the same thing "how soon we forget... Dutch tulips, .coms, housing, greed... collapse". Thanks for the lesson Steve. Then a few weeks ago, we noted that he had shockingly changed his tune, right about the time that the market was hitting new highs. We noted in half in jest (though in hindsight we'll say it wasn't in jest at all) that this was a troubling sign for the economy and the markets, that such a bear would become optimistic. Well, we know the story of the last few weeks. One has to feel a little sorry for the guy. If things continue to melt down, will people give him any credit for being prescient? Forbes' Rich Karlgaard goes farther than we would and calls him "The World's Worst Economist". We disagree in that most economists never even try to make macro forecasts, and will admit that they're terrible at it. Perhaps the lesson is that humans haven't a clue on how to predict economist gyrations:
Who else but Morgan Stanley’s Stephen Roach? In November 2004, he said the U.S. had “no better than a 10% chance of avoiding economic Armageddon.” Since then the economy grew about 4% annually. This kind of shocking error has been, alas, typical of Roach. Since the recession of 2001-2002, Roach has been unremittingly bearish. He was last bullish in, no kidding,1999. Don’t bet on Roach, in other words.
Now Roach has done it again. Three weeks ago Mr. Permabear stunned the Street by turning bullish. Global markets, of course, have taken a pounding since then … Morgan Stanley’s own MSCI World Index is down about 5% since Roach turned bullish. Here we must give a big shout of credit to the National Post’s David Berman. On May 6, the Canadian columnist wrote that when Roach makes any kind of economic or market forecast, the opposite is almost certain to occur.