Balsiger racks up third win

Inspires BIG change to contest rules.

By -- Purchasing, 3/22/2001

Wayne Balsiger's in the wrong business. Instead of working as a senior purchasing analyst and systems manager for heavy-duty truck manufacturer PACCAR in Bellevue, Wash., he should probably be cooking up economic forecasts for the Federal Reserve or some other influential group of economic policy makers, because-for a third incredible time-Balsiger has taken the prize in PURCHASING 's annual economic forecasting contest.

Not only has he won the contest three times, Balsiger has taken second place on three other occasions-in 1992 (the contest's first year), 1996 and 1998 (when he lost to Frank Ruane of Olympic Steel by a mere tenth of a point). What's more, according to PURCHASING 's existing contest records, Balsiger has never placed below the rank of 20. In 1993, his worst year on record, Balsiger placed eighteenth; last year, he took fourteenth place.

So what gives? What makes Wayne Balsiger so uncannily good at forecasting the year's economic results?

First and foremost, he watches the data-like a hawk. "Seven of the forecast indicators are published monthly," he notes. "When the contest closes on June 30, the numbers are published for January through May, and you can get a pretty good feel for June by listening to what analysts are saying." For the five quarterly GDP indicators, Balsiger notes that only first-quarter data are published by contest deadline, but says, "By then, most analysts also have a pretty good idea of what the second-quarter numbers are going to look like." From there, he says it's a simple matter to make sure his annual forecasts are at least mathematically feasible.

Balsiger also tracks the relationships among various economic indicators, a trick he picked up from PURCHASING 's 1994 contest winner Karen Kaplan. "For years now, I've been plotting various relationships between GDP and other indicators such as industrial production," he says. "I do this to ensure that my trend forecasts make sense relative to each other."

Balsiger's third strategy is to pay close attention to the chatter among professional economists, follow their forecasts, and recognize their tendencies to be either too consistently bullish or bearish on various indicators. Years ago, for example, he noticed that Merrill Lynch would consistently under-predict growth in industrial production, so he always made sure his forecast was somewhat higher. "Then one year," Balsiger laughs, "they improved their forecasting model, so I got burned."

Balsiger's bead on '01

Emphasizing that his opinions do not represent those of his company, Balsiger suggests that 2001 might prove to be a slower year, economically speaking, than most analysts are predicting at this time. "For one thing," he says, "the Fed chairman has said he suspects the economy is running near zero growth, and no forecast I've seen-with the exception of Morgan Stanley Dean Witter's-assumes that growth in the first quarter will be anywhere close to zero percent."

Balsiger, who, incidentally, invested much of his prize money from past contests, also thinks the stock market wealth effect may have been stronger than most admit in late 1999 and early 2000. This year, he says, "The reverse could occur with people spending far less."

The upshot, according to Balsiger, is that GDP growth in the first and second quarters of 2001 "could be close to zero and growth in the third and fourth quarters could run as low as 1.5% and 2.2%, respectively." These numbers would place GDP growth for the year in the vicinity of just 1% compared to a recent professional consensus prediction of 2.1%.

Growth in consumer spending, Balsiger believes, may run as low 2%-3% this year, growth in business investment could be in the 0%-3% range, and industrial production may even turn negative, he says. "I hope it's going to be stronger than that, but I think the Fed's last interest rate hike in May was a mistake, and it waited too long to start cutting rates."

The club

While Balsiger's nine-year forecast track record is truly a marvel, he does have some very serious competition.

Frank Ruane, director of corporate purchasing and materials management for Olympic Steel in Cleveland, Ohio, is the closest rival. Himself a two-time Crystal Ball contest winner, Ruane takes second place this year. In the six years he's been entering the contest, Ruane has never placed lower than eighth place.

And nipping at Ruane's heels is a large pack of consistent contenders. For example, in tenth place this year, Alan Mann of Mann Steel makes his third Top 20 appearance in four years. Mann also won the contest back in 1993.

Bruce Robinson, procurement specialist with Fuji Photo Film has six consecutive placements in the Top 50. He's fourteenth this year; his best ranking was seventh back in 1995.

Joseph D'Amico of Superior Industries places twenty-eighth this year, marking his fourth Top 50 appearance in six years. Brian Schalk, now with Andis Co., has two consecutive fifth-place showings (this year and last) plus two other Top 50 appearances since 1995.

In fourth place this year, John Stamateris of LTV Tubular Products now has three consecutive Top 20 showings. In eleventh place this year, Larry Beyreis of Johnson Truck Bodies boasts three Top 50 placements in four years.

Sixth-place finisher Robert Heimerman, now with Enron, has three consecutive Top 50 showings. Ditto for David Buteau, now with Neptco. And Tom Haring of Tricon Industries racks up his third Top 50 placement since 1995.

Last year's winner Andy Weyker of Appleton Papers turns in a respectable twelfth-place showing for 2000. Other new entrants to the two-timers' club (two times in the Top 50 since 1995) include: Joseph Barbanel of Dock Resins, Jack Knepp of Heating & Cooling Products, Nathan Meerbaum of Simkar (third place this year), Paul Ramey of Apem Components, and Jason Tininenko, a colleague of Balsiger's at PACCAR .

And, finally, regular contest players with multiple previous Top 50 placements, who entered the contest but did not show in 2000 include-

• Four timers: Michael Adam of General American Door and Mark Miller of CNH.

• Three timers: Jim Bollnow of Wyckoff, Dick Neidhardt of Newly Weds Foods, Dwight Schirmer of Inteq, and Duane Spidle of Ampex Data Systems.

• Two timers: J. Brian Bidwell of Mason & Hanger, Gary Chatham of Bunn-O-Matic, Stathis Katsaros of Matheson TriGas, Jane Maccaux of CNH Global, Louis Moss of Master Woodcraft, Tom Richards of Despatch Industries.

Important rule change!

In the years since Balsiger and Ruane started routinely locking up first and second places in PURCHASING 's annual Crystal Ball economic forecasting contest, the numbers of both new and regular players have dwindled steadily. So to encourage the pack, PURCHASING is instituting a new rule this year which allows past winners to place in future contests (the magazine really wants these gurus to keep sharing their forecasts) but not to claim any of the prize money. Upshot: Starting with the 2001 contest, the prize money, which totals $750, will be distributed, in increments of $500, $150 and $100, to the first-, second- and third-place contest finishers who have never before claimed any prize or prize money. To claim prize money, contest winners must agree to be interviewed for publication.

Warning: Because he is no longer in the running for prize money, Balsiger may have been freer this year in sharing his forecasts and methods before the contest deadline. But while 2001 contest participants are welcome to build on Balsiger's early outlook, he, for one, won't finalize his official forecasts until the twenty-ninth of June. (And, who knows, he may be trying to throw Frank Ruane off the scent!) "This is really a wide open year," Balsiger says. "Anything can happen, which makes it a great year for newcomers to enter the contest."

For a complete list of the Top 50 forecasters, go to PURCHASING 's Web site at www.purchasing.com. You'll also find on the site regular PURCHASING columnists Lance Dixon and Ken Stork.