Anyone Need a 10-Year-Old Crystal Ball?

What’s past is prologue.

--William Shakespeare

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Not always, Billy, sorry. That’s why forecasting what will happen in business and the financial markets during the next six months--never mind the next decade--is as fruitless as investing in used Pokemon cards or Planet Hollywood stock.

Even so, the media (this newspaper included) consider it an annual rite to take a stab at predicting what’s coming. It’s a noble idea--after all, past trends aren’t going to keep repeating themselves, either.

And, heck, who will remember what the media predicted a decade ago?

Bad question. Allow us to go back to December 1989 for a look at what the Los Angeles Times suggested might be coming in the ‘90s. It did make one right call: “The 1990s Don’t Promise Much Peace and Quiet.” But that’s like predicting that the sun will rise tomorrow.

Otherwise, most of the speculation about the ‘90s turned out in hindsight to be absurdly wrong, or at least absurdly shortsighted in terms of peering into the future.

It underlined what author A.J. Liebling said back in the 1950s, when the world was wildly speculating about who would succeed Soviet dictator Joseph Stalin. “The futility of flapdoodle,” Liebling termed it.

As for the ‘90s, here’s Exhibit A of the futility: A decade ago there was virtually no mention of the most revolutionary change of the ‘90s: the Internet. That’s because its popular use hadn’t even been realized yet.

Nor was there a grasp of how wireless communications systems would explode in use, though to its credit, The Times did foresee “the growth of truly portable cordless phones.”

Y2K wasn’t recognized as anything other than a typographical error. There were a few other blips no one saw coming, like, oh, the stock market nearly crashing one day in October 1997, and then, within two years, the Dow Jones industrial average surpassing the 10,000-point mark.

And no one had the foresight to see that the world would change so much that The Times would receive--get this--a Christmas card from the Russian airline Aeroflot.

Seriously, let’s be fair: If media writers (or anyone else) could accurately see 10 years into the future (or even 10 minutes), they’d be in another line of work. Or camped out at Santa Anita Park. Or locked up.

Even so, it’s intriguing to go back a decade and see what was expected to occur in the ‘90s, versus what actually happened. It’s also something to remember the next time your smart-aleck neighbor spouts off about some stock or technology that’s really going to be hot--honest!

Here are some examples:

* No better place to start than the stock market, where, as the ‘90s dawned, the Dow average stood at 2,753 and forecasters advised sticking with large-capitalization stocks such as Philip Morris Cos., Eastman Kodak Co. and McDonald’s Corp., in good part because they would benefit from the easing of trade barriers around the world.

Well, not a bad idea if you bought most of the big boys in one fell swoop via a Standard & Poor’s 500 index fund. No question that the large-caps in general were stellar performers for much of the decade--the S&P; 500 nearly quadrupled in value. But, as always, picking specific stocks was another matter. Case in point: Philip Morris and Kodak badly lagged the S&P; 500 for the decade.

And, of course, because the pundits never saw the Internet coming, neither did they see the market mania over Internet stocks such as Amazon.com Inc. and Yahoo Inc. as the decade drew to a close. They also never saw the advent of online stock trading and how it forced the nation’s venerable brokerage houses to offer their own versions of Internet trading to stay competitive.

Neither could the forecasters imagine the enormous gains of companies that would not only help the Internet do its thing, but also help spawn the incredible leaps in communications and computing overall, companies like Cisco Systems Inc. and Sun Microsystems Inc.

Oh, but it was duly reported that experts were “divided” on the direction of the stock market, depending on interest rates, the economy, things like that. No kidding.

* Speaking of getting things wrong, another forecast was for Japan and its giant companies to keep taking over the business world, especially in high technology.

Way wrong. Japan during the ‘90s suffered one of its worst economic crises since World War II. Its major banks fell on times as hard as those of the Great Depression of the 1930s, and huge Japanese investments in glamorous U.S. real estate--such as hotels and golf courses--went on the sales block.

And here’s one the forecasters really blew: The expected growth of the personal computer was expected to “play into the strengths of the Japanese” because of their expertise with electronics. But look at the best-selling brands today: Compaq Computer Corp., Dell Computer Corp. and other U.S. manufacturers.

And Japan wasn’t alone. Asia overall suffered an economic crisis starting in the summer of 1997 that is still lingering. And its problems--and their ripple effect on world economies--were a key factor in the record 554-point drop in the Dow Jones industrials on Oct. 27, 1997. However, that 7.2% setback fell well short of the 22.6% crash that occurred in the same month 10 years earlier.

* Then there was the banking industry. The Times’ predictions centered on how well the banks would stand up in the face of having made loans for property and corporate buyouts that were rapidly losing value. Fair enough.

But there was a big omission: The wave of bank and savings-and-loan mergers that would sweep through the industry. Consider: A decade ago the four largest banks in California were Bank of America, First Interstate, Security Pacific and Wells Fargo. All four have since been bought out or merged, and only Bank of America and Wells Fargo still operate under those names.

Oh, and the banking forecasts really missed another one: Those $1.50 fees for using someone else’s ATM.

* Now let’s give credit where it’s due. The Times accurately predicted that the defense industry--which a decade ago already was burdened with excess production capacity in the face of Pentagon spending cuts--was likely to see extensive cutbacks and mergers.

Talk about an understatement. As the spending cuts deepened, the industry laid off tens of thousands of workers, many in Southern California, and the ranks of the big weapons contractors were dramatically thinned by billion-dollar mergers.

* The outlook for the Southern California housing market also was shortsighted. A decade ago, the market was rapidly going sour after booming for much of the ‘80s, and there was lots of pessimism that housing values wouldn’t recover for a long time.

But they did. In fact, the region’s housing market boomed again in the latter half of the decade--sending prices sharply higher in areas such as Orange County--on the strength of the robust economy, low unemployment and low mortgage rates.

* Then there was the airline business, which is about as easy to forecast as Yahoo’s stock price a week from now. Our pundits were right about a couple of things: That there would be more controversies over safety and that U.S. and foreign airlines would forge closer ties.

But then their vision came up short again. They predicted “the stabilization of fares and a growing trend toward labor peace.” Whoops. True, leisure fares stayed relatively low, but in the latter half of the ‘90s, business fares soared, irritating corporate fliers and Capitol Hill.

And labor peace? This is the airline business we’re talking about. To cite just two examples, pilots for AMR Corp.’s American Airlines and Northwest Airlines Corp. disrupted their companies’ flights for days over labor disputes in the ‘90s, causing massive headaches for travelers nationwide.

So, overall, The Times did a creditable job of trying to see into the future of business and finance, no better nor worse than any other publication. But these examples show that hitting the mark is about as easy as predicting who will be the head of a big Hollywood studio a year from now. Go figure.

But, just for fun, let’s go out on a limb and make one bold prediction for the upcoming decade: Stock prices will fluctuate--you know, depending on interest rates, the economy, things like that.