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Beware Dr. Doom and his friends' magic numbers Add to ...

Hot news: Nouriel Roubini says there's a 40 per cent chance of a double-dip recession. Apparently, a 43 per cent chance is too high and a 38 per cent chance two low. The number is 40.

How does he know and why should we care? Because he predicted the financial crisis before it happened. If you ask him, he'll probably tell you who'll win the Stanley Cup and whether or not you can wear an orange sweater with argyle socks.

Is it just me or would anyone else rather hear what Lady Gaga thinks about the economy before being treated to more of Dr. Roubini's predictable bleakness?

You don't have to be an ostrich with your head in a hole to plead for a merciful break from the good Doctor. You just have to be a savvy consumer of media.

Dr. Roubini is a professor at New York University. But he also runs his own shop of economic consulting, so he has a very keen interest in keeping his name in the headlines. There's lots of money at stake, not to mention fame and glory.

How do you keep your name in headlines? By reminding everyone you got it right and therefore, it's implied, you will get it right again and again. But that's not enough: You also have to design your comments to attract attention. Dr. Roubini is good at it, but he isn't alone.

Uber Bears

Technical analyst Robert Prechter drew lots of eyeballs and gasps when he said last month that the Dow would fall below 1,000 (this a mere decade after James Glassman and Kevin Hassett's Dow 36,000: The New Strategy for Profiting from the Coming Rise in the Stock Market made waves - remember that staggering piece of foresight?).

It doesn't matter to Mr. Prechter that the earnings of the Dow companies - 30 of the biggest and brightest public companies in the world - would have to be ravaged like never before and trade at a price-earnings ratio that you could count on one thumb.

Mr. Prechter said he was very long on cash.

And he's probably more long today, since he charges $20 a month for his newsletter. It's not ridiculous to surmise that his subscriber list got a nice boost after he got all that attention with his bold and terrifying prediction.

Mr. Prechter might not have any real ability to predict the stock market (he could make a billion bucks with very little down making that kind of an outlier bet without telling anyone). But he understands human psychology: Most investors, according to studies, prefer an extreme and unusual forecast to a moderate prediction. The idea is that the person making such a forecast is more credible; he must have done his homework to go out on a limb like that, right? In any case, it pays off.

Lots of economists have gotten one call right and dined out on it for a long time. Few, in my experience at least, have gotten two big, bold calls right.

David Rosenberg is a good writer on economics; he's clear, concise and convincing. He also enjoys some notoriety for having been right about the housing market. Part of his job is to attract attention to the firm he works for (he recently called the economic situation in the United States a "depression," and has Related contentsaid so in The Globe and Mail as well, which he also writes for). But besides that incentive, you have to wonder whether, having been rewarded for his bearishness, he's inclined to keep being a bear?

I also wonder how much money Dr. Roubini made shorting the housing catastrophe that he so spectacularly called. Not enough to stop working hard, clearly. Lots of economists have gotten one call right and dined out on it for a long time. Few, in my experience at least, have gotten two big, bold calls right.

And anyway, it's easy to make a prediction; it's a lot harder to do it with great conviction. Read The Big Short if you want to know who really saw the financial crisis coming; who called it and put their skin at risk. They're billionaires now.

Good pundits are valuable if they make you think, but always remember what their incentives are.

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