Texas Warehouse Man Wins Derby of Economic Forecasting
Posted: March 07, 2017
Can you predict the economy?
I doubt it, but if you are willing to try, I will applaud your valor.
From 1999 to the present (with a time-out in 2007-2009), I have run an annual contest called the Derby of Economic Forecasting Talent, or DEFT for short. Entries for the 16th Derby are now open.
Gordon Wilkerson, an industrial real-estate professional from Lubbock, Texas, won the 15th DEFT contest, which covered the year 2016. He was among the top guessers in four of the contest’s six categories.
Second place went to Ric Barner of Papillon, Nebraska, who operates a wood flooring company and a bowling center. Fittingly, he made the best guess of retail sales. He also picked up points in two other categories.
John Winn, a retired attorney in Waldo, Florida, who won last year’s contest, took third place. He is one of a very few contestants to take honors more than once.
What’s Ahead?
For the coming year, none of the winners expects the economy to boom, but they do expect it to chug along.
Wilkerson is president of Wilkerson Properties Inc., which specializes in warehouses but also buys, sells and rehabs other industrial properties). He notes that the Federal Reserve has been pumping up the money supply, and he fears that will spark inflation soon.
The Trump administration, he says, is a “wild card” but likely to be more pro-business than the Obama administration. He predicts economic growth of 2.5% to 3%.
Barner pegs economic growth in 2017 at about 2.5%. He things the Trump administration will spend money on defense and infrastructure, providing a modest kick to growth. He figures that the past year’s increase in oil prices has just about run its course.
Winn figures that the course of the economy “all depends on congress and President Trump.” If we see “meaningful tax relief” for corporations, he thinks the economy will do well. He doesn’t hope for much stimulus from personal tax cuts.
Sensing Change
Contestants were asked to give their best guesses for 2016 on Gross Domestic Product growth, the change in the Consumer Price Index, the rate on the 10-year Treasury note, the price of oil, the unemployment rate, and year-end retail sales.
Of those six, the variable that changed the most in 2016 was the price of oil, which rose from about $37 a barrel when the year began to almost $54 when the year ended. No contestant guessed higher than $48.09 (which was the guess of Loyal Vincent, a retired educator in Omaha, Nebraska).
What you see at work here is “anchoring,” the near-universal tendency to base forecasts on present conditions. Most people will take the status quo, adjust by 5% or 10% up or down, and go with that. But sometimes things change more fundamentally.
When there’s a big change, most professional economists will likely miss it, as will most people in my contest. For example, in 2014 inflation was unusually low, and 38 of 40 contestants guessed too high. In 2013, unemployment declined, and all 35 contestants guessed too high.
How to Enter
Would you like to see how deft you are at predicting the economy? Just answer the six questions below and send your answers by midnight of March 31 to me at jdorfman@dorfmanvalue.com.
You can also mail your answers to John Dorfman, Dorfman Value Investments, 379 Elliot Street, Newton Upper Falls MA 02464.
All entries must include your name, address, phone number and occupation. Entries not including these items may be disqualified. I need to be able to reach you for an interview if you win.
Here are the six questions.
- The U.S. Gross Domestic Product grew 1.9% last year in real (inflation-adjusted) terms. How much will it grow in 2017?
- Inflation, measured by the Consumer Price Index, was 1.3% last year. What will it be this year?
- The interest rate on 10-year government bonds stood at 2.45% when 2016 ended. What will it be on the last day of 2017?
- A barrel of West Texas Intermediate crude oil cost $53.75 on December 31, 2016. When this year ends, what will the oil price be?
- Retailers racked up $484.68 billion in sales in December 2016. How much will they sell in December 2016?
- The unemployment rate was 4.7% when 2016 ended. What will it be when 2017 draws to a close?
You don’t have to give the reasons behind your estimates, but I always enjoy it if you do. The winner gets a trophy. Second and third place finishes bring only glory.