Who Was Most Right About the Dow?

Let's say, for the sake of argument, that the stock market has hit a bottom for the near term. Nothing is certain, but it does now look like March 5, when the Dow closed at 6594.44, was the low-water mark.

Who gets to take credit for calling it?

One nominee is Nouriel Roubini, the formerly renegade economist who seems to be right about a lot of things lately. Last year, Roubini predicted that "sometime" in 2009, the Dow would hit 7000. That number scared a lot of people at the time, although TBM columnist Mark Gimein wrote in his blog Chumpchanger that "it sure looks like it's headed that way now, and it's looking like it'll get there sooner rather than later."

So credit where due; assuming the March 5 bottom holds, Roubini's estimate was off by a mere 5.8 percent.

On the other hand, Roubini made his prediction in early October. Lehman had declared bankruptcy, AIG (AIG) was being taken over by the federal government, and the Dow had already dipped well below 10,000. Predictions that it would fall further were not that hard to come by.

Consider, then, this column from Breaking Views back in June, 2008. Martin Hutchinson, using a simple but powerful measurement of money supply, said that corporate earnings had been inflated, and that once they deflated, the Dow could drop to 7800. Now, OK, that number is off by a larger factor than Roubini's. But it's worth noting that Hutchinson was writing at a time when the Dow was comfortably above 12,000, and there were not a whole lot of people back then who were joining Hutchinson in predicting a 36 percent decline. (I'm told that Hutchinson's colleagues thought he was off his rocker.)