Fortune-Telling Fortunes

IN JULY, THE WALL STREET JOURNAL lauded University of Dallas professor Michael Cosgrove for turning in a perfeet mid-year interest-rate prediction. He beat 64 economists nationwide using his own formula based on the price of precious metals.

Although Cosgrove has participated in the invitation-only Journal survey for five years, this was his first winning forecast. Most of Wall Street’s premiers estimated 6 percent for the 30-year Treasury bond in June, but Cosgrove daringly proposed yields of 6.9 percent for the Treasury bond and 5.1 percent for the three-month Treasury bill. Both figures were right on the money.

“The ratio of silver to gold- that’s the key,” Cosgrove explains. ’’Precious metals prices tend to reflect the behav-ior of interest rates six to nine months ahead.”

Unfortunately all systems failed him late in the year. He overestimated the year-end long-term rate by a whole 1.7 percent. His excuse? No way of knowing foreigners would buy so many Treasury bonds.

Cosgrove operates a one-man consulting firm, the Econ-oclast, that manages money for industrial clients, including the Southland Corp. and the Teachers Retirement System of Texas. Its name puns the word “iconoclast,” meaning one who contests settled norms-that is, one who uses capricious silver and gold prices to gauge interest rates.