Peter Bernstein and Economic Forecasting

Despite the pressures for early and often forecasts, a number of Wall Street and City economists do as good a job as any forecasters, among them Abby Joseph Cohen, Stephen Roach and Edward Hyman. Most such investment economists are good students of market conditions careful keepers of useful data, and on occasion creative in extracting some kind of signal out of the noise. Ed Yardeni, for example, the chief economist at Deutsche Bank Securities, turns his website into a cyber-chart room. If you want to access data and view charts, Yardeni's site is an essential stop. He also makes his commentary available in a section for clients that is password protected, but a substantial amount of the content is openly accessible.

One economic commentator stands amid the few that many of us would class as the best: Peter Bernstein. He grew up heading his father's investment firm, Bernstein MacCauley, in New York. He was the first editor of the Journal of Portfolio Management, founded by Gilbert Kaplan, and has received many awards, among them the
highest honor granted by the investment management industry's professional body, the Association of Investment Management & Research.

Bernstein is able to walk on both streets with practitioners and academics. He writes a newsletter, Economics and Portfolio Strategy, to test and disseminate his analyses. And writing is one of his main strengths: his two books on the history of risk and on how capital ideas came to Wall Street have been regulars on the business best-seller lists during the 1990s.

Like a good academic, Bernstein marshals all the arguments, especially those that are counter to his own position. His mid-February 1998 letter, for example, examined the case for exuberant stock prices in the United States, giving particular emphasis to the market's reliance upon an all-knowing Federal Reserve for economic management. Bernstein concluded that "stocks are a risky investment and should be managed accordingly." Since that analysis was approximately the same as his November 1997 conclusion, he was ahead of the wave and for the right reasons. Bernstein is also faster than most to admit where he has been wrong and to try to examine what led him astray or, as he jokes, "what led the market astray when it failed to act the way I thought it would."