Predicting the economy is close to impossible.
But we have fun trying.
Welcome to the 22nd Derby of Economic Forecasting Talent, or DEFT for short. Contestants must predict six economic variables for the calendar year in progress.
You can play. The winner will get a trophy, plaque or certificate. Plus, of course, bragging rights.
I have run this contest 21 times. Among the past winners have been several investment managers, a Federal Reserve official, an American high school student in Italy, two retired professors, a retired surgeon, a maintenance man, and a banker who later became a stand-up comedian.
In 2023, six entrants tied for first. I’ll give their thoughts and prognostications below, but first let’s go over the entry rules for the next derby, which begins soon.
How to Enter
To enter, answer the six questions below and send your entry to me at jdorfman@dorfmanvalue.com, or John Dorfman, Dorfman Value Investments, 101 Federal Street, Suite 1900, Boston MA 02110. Entries must be postmarked or time-stamped by midnight, March 15, 2024.
Please provide:
· Your name
· Address
· Phone (in case you win and I want to interview you, please include a weekend phone number)
· Email address
· Occupation
You aren’t required to state the reasons behind your forecasts, but I like it if you do.
Here are the questions.
1. The U.S. economy grew 2.5% in 2023. How much will the gross domestic product grow or shrink in 2024?
2. Inflation ran 3.4% in 2022, down from 6.4% in 2022. As measured by the Consumer Price Index, what will inflation be this year?
3. The interest rate on 10-year U.S. government notes bounced around during 2023 but ended the year exactly where it began, at 3.88%. What will it be as of the end of 2023?
4. The price of crude oil (West Texas Intermediate, or WTI) ended 2023 at $75.72 a barrel, which was close to the year-end price in the two preceding years. What will the oil price be on Dec. 31, 2024?
5. U.S. retail sales (including food) totaled $706.2 billion in December of 2023, a soggy result compared to the December 2022 total of $748.2 billion. What will retail sales total in December 2024?
6. Unemployment was low at year-end 2023, at 3.7%. What will the unemployment rate be as of December 2024?
Scoring
Six people tied for first place in the 20th Derby of Economic Forecasting Talent, which covered the year 2023.
I award three points for the best guess in each category, two points for the second-best guess and one of the third-best. The theoretical maximum score is 18, but no one has ever come close to that.
Over the years, winning scores have ranged from 3.0 to 10.5. The average winning score has been 5.8. This year’s winners each scored a 3.0.
Latest Winners
David Debo, a mechanical engineer from North Huntington, Pennsylvania, has previously finished second and third in the contest. This year he shares the gold medal. Contrary to many people, he expects no interest-rate cuts from the Federal Reserve in 2024.
The reason: stubborn inflation. “I was at Sam’s club today,” he said, “and the lines were long. People are not cutting back. Inflation will cease when people really cut back.”
Lawrence Weiner, a realtor in Las Vegas, Nevada, had tied for second in the derby two years ago. He thinks the economy will get two boosts this year, one from the Federal Reserve cutting interest rates and one from the Presidential election.
John Benedict of Norfolk, Virginia, is retired now but was a nuclear engineer, and then an investment manager. He thinks the economy will “muddle along” this year but he is discouraged by “dysfunction in the Congress” and by a Presidential election where neither candidate excites him.
Jim Koenig, of South Barrington, Illinois, is a retired Chicago firefighter. Contrary to most contestants, he thinks inflation ‘will go up.” He expects a correction in the stock market this year but plans to ride it out and “maybe buy some more” stocks when he thinks it’s nearing an end.
Lawrence Ladenberg is a retired vice president of a manufacturing company, and lives in Columbia, Pennsylvania. He thinks the economy will is strong and will stay that way, partly because employment is “pretty low.” A Biden fan, he thinks the coming election will be important to the course of the economy.
Michael Nicosia of Las Vegas used to run a small company that sold computer accessories. He is surprised that the economy and the stock market have been “hanging in there” despite the war in Ukraine and the war in the Middle East. He thinks that inflation is “much higher” than official numbers indicate.
Omen?
A year ago, all of the derby winners expected a recession in 2023. It didn’t happen.
Today, all six of the latest winners expect the U.S. economy to avoid a recession in 2024. Let’s hope that’s not a contrarian omen.
