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Fall 2013





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Christopher Thornberg, BS ’89

Christopher Thornberg

Right on the Money

Economic forecaster offers a no-nonsense approach and a track record for calling it correctly

Story by Sean Nealon, BA ’01, with photo by Max S. Gerber

DURING THE MID-2000s, as home prices were jumping in much of the country and unemployment numbers were an afterthought, Christopher Thornberg, BS ’89, realized something wasn’t right. Home values and new-home construction trends didn’t match fundamental historic income levels and population growth figures, the economist noticed.

Not many agreed with him. Today, many do. Thornberg is widely cited as one of the earliest and most accurate predictors of the sub-prime mortgage market crash that began in 2007 and the global recession that followed.

“There is an old saying in finance that the trend is your friend. Unfortunately, this is very dangerous advice in practice. We focus on the fundamentals—and when the trends don’t match the fundamentals, you can bet that something is really wrong,” he says.

Thornberg’s success today is due in part to the attention he has received since calling the economic downturn. In 2007, he co-founded Beacon Economics, a Los Angeles-based economics research, consulting and forecasting firm. Its staff has since grown from two to 15.

Between 2008 and 2012, he was a chief economic adviser to the California State Controller’s Office and chaired the state controller’s Council of Economic Advisors—the body that advises the state’s chief fiscal officer about emerging economic issues.

He gives more than 80 speeches a year to everyone from local and state officials to hedge fund managers to university leaders, mainly in California, but increasingly in other parts of the nation and the world. And he has become a regular media commentator, appearing everywhere from NBC’s “Today” show to ABC’s “Nightline” to The New York Times and The Wall Street Journal. A recent Los Angeles Times profile of him was headlined “Housing bubble hero.”

Thornberg, who grew up in Rochester, N.Y., studied business at UB with a focus on marketing. After graduating, he spent two years traveling the world before enrolling at UCLA for graduate school. He earned his PhD in 1997 and then accepted a job as an economics professor at Clemson University in South Carolina.

In 2000, he faced a decision: Stay at Clemson and climb the academic ladder or take a job offered by his former adviser at UCLA at the university’s economic forecasting center. He opted for UCLA.

Thirteen years later, he is convinced he made the right move.

Thornberg believes the bridge economic forecasting provides between academic work and the business community better suits his personality than does the slower-paced, more isolated world of universities.

His firm’s blog is called “No Nonsense Economics: Economic Insights Without The Hype,” a motto partly influenced by Thornberg’s don’t-hold-back personality (he doesn’t worry about dropping a salty word into an interview), and partly by the firm’s commitment to its business model of delivering objective, accurate research as opposed to “selling” answers clients may want to hear.

For Thornberg, there are two keys to economic forecasting: trends and fundamentals. Trends mean the latest unemployment rates, home price numbers, etc. Fundamentals mean that you have to understand past economic swings and relate to current ones.

Despite his accurate prediction about the recent economic downturn, Thornberg concedes forecasting is an inexact science.

“No forecast is right,” he says. “Some forecasts are less wrong than other forecasts. I just think I’m pretty good at being less wrong than the others.”


Thornberg on wading through economic news

> Pay attention to the source. Too much of what we hear is junk—people shouting opinions not facts. Look for content based on actual data and unbiased analysis.

> One month is not a trend. You need to look at multiple periods to perceive a change in trend.

> A lot of conventional wisdom is wrong. For example, the ideas that raising taxes hurts economic growth and that interest tax deductions increase homeownership, while popular with the politicians, have little support in the data.

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