No matter what happens going forward it was a dead wrong catastrophic call IMO made far worse by the media tour following the public announcement in which Lak indicated absolute certainty about both the recession and the fact it would be bad, and to paraphrase their words "if you think things are bad now you ain't seen nothing yet." They talked about unemployment likely going into double digits among other things and it was their choice to use the highly urgent inflammatory words that suggested the need for immediate action when he spoke about how there was a downward wildfire contagion in the indicators.
The fact is the call and the way it was presented was as wrong and as bad as could be imagined The fact that they have stuck with it including with the Bloomberg interview of 12/8 re-affirming the call, an interview they still have linked on their site, says they stubbornly have doubled down rather than shown the slightest indication of doubt in the face of their own WLI moving strongly up along with numerous other economic indicators including the Conference Board Index of Leading Indicators and jobless claims showing strength. I can only think that they may have been hoping that their call would be bailed out by problems in Europe and with Europe not falling apart they seem to be in a bunker mentality worried about embarrassment and the lost of perhaps millions in subscriptions and fees that were being shelled out to them given their prior aura of infallibility. Bob and Lak entered the Thunderdome, my prediction at the time that Lak would be the one leaving alive was dead wrong and Bob is the one leaving.
The timing of their call couldn't have been worse as it looked like a 1998 type bottom around 9/22 and after initially getting very aggressive I basically did an about face to bearish on the ECRI call. Fortunately I at least didn't sell a large biotech position I had which has done well since but I had a few bearish hedges which I had to blow out of and it turned me necessarily over- cautious in some conservative accounts I'm handling. Whatever happens going forward I'm comfortable proclaiming Lak and the ECRI the biggest loser of 2011 and the last 6 months. I think with their long leading indicator down for a long time making them trigger-happy they then over-reacted to some short term factors and made a terrible call.
When they made the call with full confidence and certainty I thought about how it's been proven that people believe in court testimony and eyewitness identification based on the confidence and certainty of the person, but psych experiments have proven there's no real correlation between that confidence and what the person says actually being correct. In this case a bunch of overconfidence and certainly by Lak made a wrong call far worse and while nobody's been convicted of murder by the mistake, the timing of the call made many long time believers do the exact opposite of what they should have been doing in terms of investing at the time of their call. |
