All of us who write opinion often wake up sweating and trembling after a nightmare like this. Don Luskin, a CNBC talking head, not only got it wrong a year ago, he got it all wrong and way wrong.
As the financial industry "celebrates" the anniversary of the the meltdown - which is usually marked with the failure of Lehman Brothers, they spotlighted Luskin's astonishingly bad grasp of the situation.
Just one painful excerpt from 9/14/2008:
A housing "slump," a housing "crisis"? A "severe" price decline? According to the latest report from the National Association of Realtors, the median price of an existing home is up 8.5 percent from the low of last February. And according to the U.S. Census Bureau, the median price of a new home is up 1.3 percent from the low of last December. Home prices may not be at all-time highs -- and there are pockets of continuing decline in some urban areas -- but overall they've clearly stopped going down and have started to recover. So why keep proclaiming a "crisis" after it's over?
"Turmoil" in the debt markets? Sure, but we've seen plenty worse. According to the FDIC, there have been a total of 13 bank failures in 2007 and so far into 2008. There were 15 in 1999-2000, the climax of the Obama-celebrated era of Clintonian prosperity. And in recession-free 1988-89, there were 1,004 failures -- almost an order of magnitude more than today. Since the Great Depression, the average number of bank failures each year has been 94.
Despite highly publicized losses in subprime mortgage lending, bank equity capital -- the best measure of core financial strength -- is now $1.35 trillion, more than the $1.28 trillion level of mid-2007, before the "turmoil" even began.
Financial market "crisis" and "meltdown"? Yes, from all-time highs last October, the S&P 500 has fallen 20 percent. But that's nothing by historical standards. Stocks have often fallen more than that over comparable spans of time. They fell more than twice that much in 1974 -- which was truly the worst drop since the Great Depression. Even the present 20-percent loss isn't what it seems. The damage has been heavily concentrated in the financial sector -- banks, investment firms and mortgage companies. If you exclude that sector, stocks are off 14.8 percent.
Some economic indicators -- export growth and non-defense capital goods orders such as industrial machinery, for example -- are running at levels associated with brisk expansion. Others are running at middling levels, such as the closely followed Institute for Supply Management manufacturing index. But it's actually difficult to find many that are running at truly recessionary levels. [More]
At the time we were already 9 months into recession, remember.
Nonetheless, the solution for such goof-ups is to predict some more stuff. That's what we do.If fact, my next TP column will could place me in his company as well one year hence.
But this is a Wikipedia entry that would argue he should not be allowed near a microphone/camera:
[More]Luskin's predictions were controversial again in 2008 when, in a September Washington Post he cited evidence of what he claimed were factual errors made by Barack Obama and members of his presidential campaign concerning the state of the economy. Luskin claimed that the market was healthy, and Obama was simply using the state of the economy to discredit John McCain. However, two days later, on September 16th, the stock market had a record plummet, thus discrediting every prediction he made in his editorial. Additionally, in the same editorial, he cited evidence that the economy was weak, but not in recession. He wrote, "…anyone who says we’re in a recession, or heading into one—especially the worst one since the Great Depression—is making up his own private definition of recession." Shortly afterward, following the sudden collapse of several large financial firms, the economy sharply worsened, and was subsequently declared to have been in recession all year by the National Bureau of Economic Research. editorial,Foreign Policy included Luskin's prediction in its list of "The 10 Worst Predictions for 2008" on its website and noted that it gave additional opportunities for liberal bloggers to criticize Luskin. The editors of The Yale Book of Quotations He has been singled out for "some of the worst, money losing commentary of the past few years." also made note of the inopportune timing of Luskin's editorial and included his prediction in their list of "Top ten quotes of 2008".He has been frequently referred to by Brad DeLong as "the Stupidest Man Alive" for, amongst other things, his continued support for literal interpretations of the Laffer Curve.
This perhaps illustrates how not to use talking head predictions. They may be useful for defining the range of possible outcomes, but all are fraught with emotional, irrational judgments, despite the author's best efforts.