Food inflation: curable by shouting at retailers? US slow banking crisis rumbles on. UK avoids recession but not boiled frog syndrome. Surprising similarities between Shinners and Lib-Dems.
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If and when an insolvency event occurs, it should be a risk you didn’t see coming. Perhaps it’s my insurance and pension background but I find it absolutely extraordinary that regulators can allow a situation to happen where a blatantly obvious risk like interest rate mismatching threatens the solvency of a bank.
Is it a privileged position to be in to be able to say I never forecast, and I think all forecasting is a mugs game? Surely we can accept forecasts are absolutely necessary as a basis for decision making about the future?
As an actuary, all I do all day in work is forecast. In general, the wise strategy is to minimise the use of your own judgement where possible. You don’t want your neck on the line, and to be in a position of having to defend your own judgement. So what do you do? Where possible you rely on market data. And when there’s none, you rely on the expert judgement of others, and hopefully a variety of others to establish a range against which to benchmark. And with the remaining areas of uncertainty, where you have to choose something sensible yourself, you sensitivity test to show what the forecast might look like if you’re wrong. And ultimately, to some degree, all sources will be in some way wrong.
But what can you do in the absence of a forecast? Base decisions on a hunch, or on the assumptions that the future will be exactly like the past?
I often heard during the pandemic armchair commentators bemoan how wrong the COVID models were. A model developed at speed using very little data in an environment where both the virus and human behaviour was continuously changing, making past data less and less relevant. Yet nobody slagging off the modellers could tell me what was a better substitute for the model - other than their own opinion of what they themselves would prefer be done (which differed from person to person).