Contests
Forecast Champ Calls Forecasting A Waste
Dan Ackman, 05.09.02, 8:00 AM ET

The winner of Forbes' 2001 Forecasting contest doesn't think much of forecasting. "Year-to-year predicting is pretty useless. It's impossible to do...a waste of time," says Claude Leveille, who wasted little time on the picks that won him the contest and the $10,000 first prize.

Contest winner Claude Leveille

Leveille, 36, a former business strategist for AtHome, now spends most of his time managing his own investments from his home in Bellingham, Wash., while he and his wife Patricia Baumhart await the birth of their first child. He prefers investing based on what he calls "margins of safety," focusing on current values, not predictions of future prices.

Leveille ranked first out of more than 1,500 entrants in the Forbes' forecasting contest. Contestants were asked at the beginning of the year to predict the end-of-year values of 15 economic indicators, ranging from the rate of inflation to the level of the Forbes 40 Wealth Index. Leveille scored 85 out of a possible 150. The average contestant scored 39.

Question	Jan. 1, 2001	Dec. 31, 2001	Winner's Pick	Median Pick
Nasdaq Index	2,797	1,950	1,950	3,230
DJIA	10,664	10,022	9,700	11,500
Market Value Forbes 40 Wealth Index	390	283	234	410
Index Value Forbes 40 Wealth Index	2,639	2,212	2,190	2,818
Forbes 400 Members In Technology	75	43	45	79
Unemployment Rate	3.6%	5.4%	5.3%	4.1%
Prime Rate	9.50%	4.75%	8.75%	8.50%
Inflation Rate	3.4%	1.6%	1.8%	3.2%
Price Of Gallon Of Gas (U.S. avg., regular unleaded, tax incl.)	$1.49	$1.10	$1.62	$1.50
Home Mortgage Rate (30-year fixed)	7.95%	6.89%	7.70%	7.42%
Yen Per Dollar	110	132	100	112
Dollars Per Euro	0.89	0.89	0.98	0.93
Gold Price Per Ounce	$274	$279	$290	$283
U.S. Households With High-Speed Internet Access*	5 million	11 million	9.3 million	6.99 million
Ten-Year Treasury Rate	5.40%	5.07%	5.10%	5.24%

The Montreal native with a business degree from the University of Chicago predicted the Nasdaq's 2001 year-end level of 1950 perfectly. (It started the year at 2,797.) He also did well predicting the Dow Jones Industrial Average and the unemployment rate. Leveille also pegged the number of technology types on the Forbes 400 list of the richest Americans at 45. (The actual number was 43, down from 75 the year before.)

Leveille says he had an inkling the stock market and especially the tech market were headed south, but he claims no special insight. "I invest myself. I follow the market pretty closely. This was my sense of where the market would be going. No more than that really. No great models or long calculations." As for his perfect call on the Nasdaq: "That was the one I spent the least time trying to figure out."

As a group, the predictors were overly optimistic. The median guesser thought the Nasdaq would rebound to 3,230 and the DJIA would rise by nearly 1,000 points to 11,500. The group thought unemployment would rise from 3.6% to 4.1%. In fact, the unemployment rate climbed to 5.7%. (It has risen more since the end of last year.)

Leveille's off-the-cuff method easily beat the other 1,500 prognosticators who weighed in. But even he was way off in several categories. He predicted the prime rate would be 8.75%. Actually, it wound up at 4.75%. He guessed the price of a gallon of gas would rise from $1.49 to $1.62. In fact it fell to $1.10.

Given his overall success, we asked Leveille for a sneak peek at the future, but he begged off. Not, he insists, because his forecasts are too valuable to dispense for nothing, but because they have almost no value at all. "You can ask the high-priced guys on Wall Street. They're paid a lot to do it." The one stock he admitted owning is Berkshire Hathaway (nyse: BRKa - news - people ), whose CEO Warren Buffet is sometimes known as the Oracle of Omaha, but who also emphasizes value over predicted growth. Our contest winner bought Berkshire two years ago. "I expect to own it until the day I die," he says.

Leveille left AtHome in early 2000, when the stock was still in the mid-$30s. But his departure had nothing to do with any prediction of the company's demise and ultimate bankruptcy 18 months later.

He'd been there for four years--since before it went public--and enjoyed the experience. But working in Silicon Valley left him exhausted. "What happened during those years was mind-boggling," he says. "I don't think it will happen again in our lifetime." Many of his colleagues in the Valley got caught up in the wild gyrations of the share prices and IPOs of that seemingly long-ago era. But, Leveille says, "The way I invest is completely the opposite."