Editor's letter

The future rarely does what you expect it to

In the world of finance, everyone is desperate to learn what the future holds. But, says Merryn Somerset Webb, it rarely holds what we expect.

929_MW_P03_Ed-Letter

A journalist friend, James Fergusson, recently visited the once-gorgeous art deco Montazat Al-Lido hotel on the Dead Sea's northern shore. In the 1920s, it was a cosmopolitan beach resort (think guests arriving by Imperial Airways sea planes). Today it is far from the beach; long-abandoned; and distinctly unglamorous. Yet it isn't entirely empty. From thick layers of dust in the lobby, James picked up a couple of books. One made him think of me: The Economics of the 1960s by Colin Clark, published by MacMillan and Co Ltd in London in 1942. Yes, a forecasting book and and one that should act as a salutary reminder to all writers to forecast as little as possible, even if John Maynard Keynes considers you a "bit of a genius" (and particularly, perhaps, in the middle of a world war).

Clark had a good go at estimating the "most probable course of world populations, industrial development, prices, capital movements and interest rates" 20 years out (he saw the US boom and Japan's overtaking of much of the West). But a flick through reveals just how much human behaviour can mess with perfectly sensible-looking numbers. For example, Clark notes the "stagnancy" of the UK population and the misery that would result. He didn't see just how long the war would last (he thought the post-war boom and depression would be over by 1945) nor how the West would react to its end (lots of sex) our population was around 47 million in 1939 and 52.5 million by 1960.

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Remember this in the coming weeks as you are told what will happen to housing, the US economy, markets and to the Brexit-bemused UK in 2019. It isn't just the next 50 years that are mostly unfathomable, but the next 20, ten and five, too. It makes no sense to extrapolate current trends forever. But nor is it worth spending too much time on the mostly unknowable events that might disrupt those trends either.

On the plus side, one thing we do know is that little is more often wrong than the consensus so for a hint of the future, it's better to think about the things that others are not. In this week's magazine, John Stepek talks you through some "grey swans" for 2019, and Matthew Lynn forecasts that Facebook will buy The Times (bold!). Then we look at the euro. Everyone recognises its horrible flaws. Everyone reckons it will muddle through. Will it? Our confused MPs seem to think they can legislate against a no-deal exit. They can't it is the default. So it is more likely than most think.

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Finally, Bill Bonner has been telling you for years that the US market is ripe for collapse. This may be the year he is right (on valuation grounds, it should be). Or it might not be. Either way, that James found Clark's book where he did shows two things. First, that everyone everywhere is always intent on learning what the future holds. Second, that the future is remarkably unco-operative.

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