February 3, 2011
Another Idiotic Forecast, (no, not mine)
Some big news in the media financial pages - housing prices in Canada have formed a bubble and prices are at risk of dropping 25% or more over the next several years, possibly pushing us into recession. ORLY? Yes, indeed, that the headline across the country 'Housing Prices to Fall..."
Hmmm. Sez who? I wonder to myself. Capital Economics is the answer. More specifically a fellow named David Madani. Who are they? They are professional think tank - brains for bucks if you like - mensa mercenaries - that produce all sorts of economic reports, data blah blah blah for governments, institutions and corporations and charge huge fees for their research. Mr. Madani comes to them through the Export Development Corporation and a brief stint at the Bank of Canada. He arrived at Capital Economics in September 2010 and apparantly has 10 years worth of forecasting experience.
So why all the press. Well, putting out a report that has some good shock value is a good idea if you want press in Canada. Real estate is a sexy topic, as long as its BIG NEWS or BAD NEWS or SHOCKING NEWS. Not so sexy if its MARKET IS NORMAL news. In the same way there is no such thing as regular winter storm in Canada anymore, there are only WHITEOUTS and BLIZZARD CONDITIONS and ICE STORMS and PARALYZING COLD SNAPS, there is no such thing as normal real estate news. So you put out a BIG NEWS report, get it picked up by the 2 or 3 news outlets that supply all our major markets and Voila! National Coverage!
That's some smart marketing for Capital Economics. It's not new of course - but they've been doing it well for a while now - releasing a report to the content starved, (read understaffed and happy to take free content), mainstream media. Gee - do you think that Mr. Madani's phone might start to ring with actual paying clients whenever he gets quoted in the paper? Do you think maybe that was the point? And do you think maybe that they don't care whether they are accurate or right? Or do you think perhaps that in their report there are lots of escape clauses and uses of the words might, may and at risk and perhaps? Do you think those are in there so that 2 years from now when the market hasn't dropped 25% or more Mr. Madani can say "I was simply pointing out the risk in the housing market - not claiming it would actually happen".
Or perhaps Mr. Madani actually believes these things and isn't trying to drum up business in his new job of six months. I know an easy way to find out - will Mr Madani be selling his home in the next six months? Or won't he put his money where his mouth is?
And why did no-one ask him?
And for that I say quite clearly this forecast is worth exactly what was paid for it - nothing!
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