Politicians almost never admit they’ve been wrong. Market analysts are almost pathologically the opposite: they not only admit their mistakes, but seem to take great delight in doing so, even if no one’s calling them to task.
That was obvious recently in the flood of annual reviews and outlooks that most market analysis firms released. Most provided frank discussions of where they went wrong in 2007 before tackling the new year.
“While we were cyclically bearish on the dollar, we grossly underestimated the magnitude of the dollar descent,” said Morgan Stanley in its U.S. dollar discussion.
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“In short, we misjudged the intensity of the market violence.”
In these reviews, analysts seem to spend more time talking about where they went wrong than what they got right.
When I called prairie crop market analysts I found the same phenomenon: an almost eager desire to talk about wrong calls and a lack of interest in talking about the nails they hit squarely on the head.
“My worst call? The inability to see $10 wheat,” said Errol Anderson of Pro Market Communications.
“I didn’t see that one coming.”
That’s the same miss that Brenda Tjaden Lepp jumped on when asked the same question. “We didn’t give the wheat market enough credit,” said Tjaden Lepp, who recommended selling wheat through Canadian Wheat Board contracts at prices now lower than the present Pool Return Outlook.
“A lot of people underestimated the wheat market this year and what it could do, and we would include ourselves among them.”
Each of these analysts made great calls in 2007. Anderson jumped off the barley horse before it flagged in the fall, helping his clients lock in near-peak prices before a steady sell-off that still hasn’t been completely reversed.
Tjaden Lepp encouraged and argued with her clients to hold on to as much canola and other oilseeds as possible after harvest, even though most wanted to sell at prices that are now far below market prices.
But when discussing these good calls, the analysts are less effusive, less excited about the topic than about their bad calls.
Analyst John Duvenaud seemed crippled by humility when quizzed about his overall good call for 2007.
“I said things would go up, which they did. So that was good. But everyone said that, so it doesn’t mean much,” he said offhandedly.
That’s what I enjoy most about covering the markets. For all of its mysteries, for the opacity that cloaks the actions of commodity funds and elements of supply and demand that are never revealed in the best analysis, the markets are dominated by analysts and traders who have a fundamental commitment to honest discussion and frankness, regardless of the risk of future embarrassment.
It’s a rare occasion when you can call up an analyst, broker or trader and not get an instantaneous earful about what’s going on in the market and what’s likely to come next.
And it’s easy to get them to admit where they’ve been wrong, where they’ve been surprised and where they just don’t know.
