Even Harvard businessman & woolly bears can get it right

I have seen a lot of woolly bears recently. Also called woolly worms, they are familiar caterpillars with black bands at the ends of their bodies, separated by a reddish-orange band in the middle. These common little critters grow up to become Isabella tiger moths after winter is over.

When they are seen out crawling around in the fall, they are also the subject of an old legend that says that they are useful in predicting the winter.   According to this bit of country folklore, the more black they have on them, the worse the coming winter's weather will be.

All the ones I saw had wide orange bands, so I guess that according to caterpillar forecasting, we're in for a mild winter. Only problem is, there doesn't seem to be much good research to back this up. In fact, a lot of other indicators point to the opposite being true.

The almanacs are predicting a fairly dreary winter in much of the country. The decidedly more scientific folks at the National Oceanic and Atmospheric Administration (NOAA) note that this is an El Niño year, which can bring milder northern winters and stormier southern ones to the United States. Who's right? Pretty hard to say.

If winter forecasting is as reliable as hurricane forecasting, it's anything but a sure thing. Last December, some scientists predicted an "above average" 2009 tropical season in the Atlantic with 14 named storms and eight hurricanes. By May, the revised consensus was that it would be a milder season, but still one with plenty of storms. The NOAA crowd showed how to not go out on a limb by predicting a 50 percent chance of an average season, a 25 percent chance of an above-average season, and a 25 percent chance of a below-average season. How's that for hedging your bets?

With a month or so to go in hurricane season, there have been only eight named storms and two hurricanes, with no major systems making landfall in the Southeast.

Not surprising. Nearly everyone who's even dabbled in research would agree that predicting stuff is much harder than explaining it after it happens. If that wasn't true, then every economist worth his or her salt would be able to retire at 40 after successfully investing for just a few years.

But we know that's not happening. Just look at the "best and the brightest" up at Harvard who, after losing around $10 billion in foundation assets during the most recent fiscal year, revealed just last week that they lost another $1.8 billion in operating money via squirrelly hedge fund and stock investments. The Boston Globe reported that Harvard's CFO thought the bet was worth the risk at first, but it turned out not to be. The rest of the nation's universities aren't too far behind the kids from Cambridge, as most of them have also lost between 20-30 percent of their own endowments.

Making predictions is tough; betting on them can be risky. Is the recession over? Is it time to get back in the stock market? Who will win the BCS Championship? How bad will the 2010 hurricane season be? What kind of winter will we have? Sometimes even the best in science, econometrics, preseason polls or woolly bears can't say for sure. You buy your ticket and you take your chances.

I sure don't know much of anything either, but if I were to guess, I'd say that this looks like it's still the season to invest conservatively, lay in an extra cord of wood, and buy a good winter coat.

The original version of this column appeared in Matt Zuefle's regular column "Dispatches from the Ivory Trailer" in the weekly Oxford Town (Oxford, Mississippi). He can be contacted at crotaxa@hotmail.com.