This week on Masters in Business I sit down with an old fishing buddy — Martin Barnes, Chief Economists of BCA Research. He cut his teeth as an economist with British Petroleum in London from 1973 to 1977; Barnes then spent 10 years as chief international economist with Wood Mackenzie, one of the top U.K. brokerage firms. He joined Montreal based Bank Credit Analyst (BCA) 30 years ago, and now lives in Victoria BC, an island near Vancouver.
Barnes discusses how a global institutional client base of sovereign wealth fund, hedge funds, state pension funds and central banks demands more than economic data. They want actionable intelligence, regardless of whether they are hedge funds looking for a trade that afternoon, or sovereign wealth funds deploying capital with time horizons measured in decades.
Barnes has been a student of and a confidante to central banks around the world. He has been visiting the Federal Reserve and its staff since 1979. He has a long history of speaking with Fed governors, researchers, and chairmen. While he defends what the Fed did in the midst of the crisis, he has been a critic of the excessive accommodation and “financial repression” that has followed the first Quantitative Easing.
We discuss how poor the Fed’s forecasting track record is, and how it levels the playing field for all economic analysts (though admits its scary realizing that they know no more than anyone else about the future). He tells us about pricing, and the inflation ”in things we buy everyday and the deflation in the things we buy only occasionally.”
Forecasts aside, Barnes explains why the Fed’s models, indeed, ALL econometric models based upon the past, can lead us astray. He also notes that their change in transparency has swung too far in their efforts to communicate, saying “the Fed should act more and talk less.”
You can hear the full interview, including our podcast extras, at iTunes, Soundcloud and Bloomberg. All of our earlier podcasts can be found at iTunes, Soundcloud and Bloomberg. (Please send your suggestions for future topics to MIBPodcast at Bloomberg dot net).
All of Barnes recommended books discussed can be found after the jump.
Next week, we speak with Arun Sundararajan, professor at NYU’s Stern School of Business, and author of The Sharing Economy: The End of Employment and the Rise of Crowd-Based Capitalism.
Martin Barne’s recommended books