One of my less treasured possessions is an autographed copy of The Great Depression of 1990 by a respected economist Ravi Batra.
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Turns out there wasn't a great depression, though Australia managed a recession then, and again in 1999 when he had a second shot at it. More troubling was that he misspelt my name which I'd put down to possible mumbling on my part, but maybe it was an omen.
Not that I should be ungrateful because if a banknote with the denomination missing or a stamp without the right colour can be worth a fortune why not a book with two imperfections?
Sadly I missed Stock Market Crashes of 1998 and 1999 but then so apparently did the market. In those two years markets boomed with Wall Street turning in its third best performance – a 45 per cent gain. Oh well, we all make mistakes.
I mention this only to show that experts get it wrong, and those who are the most pessimistic tend to be the most wrong.
It's not as if there's been a dearth of economic disasters, either. Naturally the genuine great depression comes to mind and, more recently, the global financial crisis, neither of which were forecast.
Nor was all the good stuff for that matter, such as the booming sharemarket of the nineties and most of the noughties. Or post-GFC, record low interest rates and the virtual disappearance of inflation.
Even as we speak one of the most significant developments for the global economy is the slump in the oil price, mostly due to the production surge from fracking in the US. Who predicted that?
Mind you, it's the bad stuff we want to hear and apparently are more likely to remember.
AMP Capital's head of investment strategy and chief economist, Shane Oliver, points out that when the sharemarket drops 1 per cent the headlines are about $16 billion being wiped out but when it rises 1 per cent there's nothing about it adding $16 billion.
"The human mind has been hard wired to always be on guard and so is naturally attracted to doomsayers," Oliver says.
It's also known that we feel a loss more intensely than a gain. But trying to avoid losses can warp your investment judgment, and even create them if you become too cautious or go with the supposed safety of the crowd.
Still, this doesn't explain why doomsayers get it wrong or fail to predict the right crisis.
Nassim Taleb who is a financial derivatives trader turned philosopher – from one extreme to another, I know — argues in The Black Swan that it's the highly improbable, and so unpredicted, that bites us on the behind.
He names this a black swan event after the fact that everybody in the northern hemisphere knew swans were always white because they'd never seen a black one.
Experts and commentators tend to bunch together in their opinions and forecasting — Taleb calls it herding — and as a result "the distance between opinions is remarkably narrower than the distance between the average of opinions and truth."
They're also likely to group together on what the next problem or crisis might be, imparting a certainty that isn't there, possibly causing unnecessary worry, and diverting attention from other seemingly less likely but potentially bigger risks.
This goes for picking stocks too.
There was a survey of 2000 Wall Street stock tips by brokers who had in fact predicted "nothing" in Taleb's word — that's to say any mug who extrapolated from the past would have done no better or worse – yet they would have had more information to go on.
Also the brokers were useless together. Their errors "were significantly larger than the average difference between individual forecasts, which indicates herding," Taleb says.
This tendency to follow the crowd, or opinion leaders as the case may be, is well known though funnily enough that doesn't stop it.
It may be getting worse. More seems to be less when it comes to all the information that's at our fingertips these days.
All that knowledge "means investment markets should be more efficient than ever," says Oliver yet "it's hard to see any evidence that all the extra information is resulting in more rational pricing of shares and currencies." On the contrary, all the mostly negative news "and our innate fascination with crises is making us worse investors: more fearful, more jittery and more focused on the short term."
