Avoid the Yogi Berra trap: Don’t make predictions about the future in a topsy-turvy world

Has economic forecasting ever seemed so fraught with risk? A mix of almost imponderable new possibilities made possible by AI and the unpredictable state of the world makes people who trade contracts on so-called prediction markets seem foolhardy. Still, spare a kind thought for those of us in the commentariat who must hedge our prophesying.Put aside for a moment how long the truce between the US, Israel and Iran will last. And, if it does, how to estimate the huge backlog of ships and tankers waiting to transit through the Strait of Hormuz and how long this will take to clear.

There is plenty else where outcomes seem more binary than ever. Take the concerns about private credit markets and bets made by private equity giants. Is it containable, given the limits on redemption and withdrawals that would prevent a Silicon Valley Bank-style bank-run crisis? Or are second-order effects likely?Last week, Blue Owl Capital, a large New York-based private credit and investment firm, reported that investors had sought to withdraw $5.4 billion from two of its premier funds in the first quarter.

On Monday, JPMorgan Chase’s Jamie Dimon warned that “losses on all leveraged lending will be higher than expected,” yet another broadside directed at private credit firms. Then there is the dollar, a now perennial puzzle. Amid alarm at how long the Third Gulf War looks set to handicap the global economy, the dollar has—surprise—risen.

This is despite non-US central banks having sold $82 billion worth of US Treasuries, as the Financial Times reported, after the war of choice started. That sell-off, it turns out, was offset not just by rising dollar demand as oil prices rose, but also by long Treasury positions held by hedge funds. As large as