Whether it's using cups or quantitative analysis, there is always a big market in guessing the future in uncertain times, writes Tim Elliott.

IN DECEMBER 2007 Lindel Barker-Revell, the Observatory Hotel's resident tea-leaf reader and long-time astrologer, converted all her assets to cash. "All the signs were there," she says. "The outer planets were moving into the earth signs - Pluto into Capricorn, Saturn into Virgo - which meant things had to be brought back down to earth. No more gambling with money. I told my clients that they had to take precautions. Now some of them are saying, 'I wish I'd listened to you."'

Ms Barker-Revell, who has been reading tea leaves for 30 years, belongs to that standing army of prognosticators, from palm readers to bone throwers and quantitative analysts, who throughout history have made money in the present by selling us the future. Since well before the Oracle of Delphi such prescience has been prized, but never more so than today, when everyone from political pundits to climatologists and economists get paid for their predictions. However, it is the economist, with his Solomonic market wisdom and cosmically detailed modelling, who occupies an almost seer-like place in the forecasting industry.

"In times of uncertainty the demand for forecasting takes off," Vic Edwards, a senior lecture in banking and finance at the University of NSW and a specialist in predicting corporate failure, says. "People tend to make more predictions but they're also more likely to be wrong."

The record of most market forecasters on the meltdown has been "f---in' awful," according to Dr Steve Keen, an Associate Professor in economics and finance at the University of Western Sydney. "The interesting thing is not that they were wrong, but how wrong they got it."

In late 2007, when Ms Barker-Revell was seeing danger in the financial firmament, most official agencies remained remarkably bullish, with the RBA increasing rates to ward off inflation, and Treasury forecasting near normal growth levels. The US Federal Reserve chairman, Ben Bernanke, a macroeconomist and expert on the Great Depression, was talking down the subprime crisis, saying it would have "no serious spillover to banks". And early last year a British economist, Anatole Kaletsky, wrote in The Times of London that: "The global credit crisis, far from taking a turn for the worse, is now almost over."

Mr Kaletsky and Mr Bernanke were making macroeconomic forecasts, a genre with a long and hopelessly chequered history. The ancient Egyptians forecast harvests - a large part of what we would call their GDP - from the level of the Nile flood. By the late 1920s analysts were beginning to use statistics; not that this helped Irving Fisher, a market guru and professor of economics at Yale University, who, two weeks after the 1929 sharemarket crash, wrote that the decline would "not be [for] long, only a few more days at most". Not to be outdone, the US Department of Labour predicted in December 1929 that 1930 would be "a splendid employment year".

Today's experts have fared little better. "No one is any good at forecasting anything that matters," says the Macquarie Group strategist Rory Robertson. This is not only because "the future is inherently unknowable" but because many forecasters rely on classical economic models that are predicated on equilibrium. According to such models, businesses, consumers and other economic "agents" are thought to act rationally, in their own self-interest, with the economy invariably self-correcting.

"If there have been many stable years, the tendency is to predict more of the same," Mr Robertson says. "That's why it's par for the course for economists not to predict unusual events, which is unfortunate, because forecasting these turning points is the only thing that matters."

Of course, some elements - such as exchange rates and stock markets - are harder to predict than others. Whenever Saul Eslake of the ANZ is asked for a stock forecast, "I write NF - for 'no forecast'," he says. "Sometimes I think I should put 'NFI'."

Mr Eslake is often amazed by the importance people place on his forecasts. "Sometimes people take them too literally."

He does not use models to forecast, because models rely on speculative inputs (i.e. what the exchange rate will be at a particular point) and because models, in their reliance on internal consistency, do not place enough emphasis on low probability but high-impact events, otherwise known as "black swans". Instead, he uses his market knowledge and experience, not to mention "voluminous disclaimers. And forecasts tend to be vague. It's like the old economist's joke: when forecasting you should give numbers or dates, but not both."

But at least one forecaster is unafraid to put it all on the line."I'm seeing a turn around in October," Ms Barker-Revell says, "particularly for stocks, because Saturn, which is reality, is moving out of the Earth sign of Virgo and into the air sign of Libra, which is the lawmaker."

So is she re-investing? "Not quite yet, but I'll be jumping back in shortly."