A clear precursor to this effect is “Card in Balloon”, which was established by 1930, with a number of versions quickly appearing in print and as marketed items in Britain and the United States. An obvious variation to this effect followed, “Marked Bill in Balloon” by LeRoy Lahey, published in Conjurors’ Magazine, Vol. 2 No. 3, May 1946, p. 21. There Lahey acknowledged: “this is not a new effect”. Other versions cropped up over the next two decades.
Extending the notion to the produced object being a prediction apparently did not find its way into print until 1958, with the release of Step Four of Corinda’s Thirteen Steps to Mentalism, “Predictions,” which included that author’s “Novel Adaptation of the 'Card in Balloon'“, p. 113. This used an apparatus approach, based on the popular Hathaway method for Card in Balloon that hit the market in 1940.
The method wherein a “masked” dummy prediction is shown to be inside the balloon prior to the bursting was also introduced in 1958, marketed as “Air Tight Prediction” by Hollywood Magic Exchange, a southern California company run by Kirk Kirkham; see The Linking Ring, Vol. 38 No. 9, Nov. 1958, p. 17.
In the New Jinx, Vol. 2 No. 15, July 1963, p. 66, Danny Tong offered a method he created in 1959, described as “a problem [that] was given to me to solve….” Given the timing, it seems likely this was meant as a solution to the advertised “Air Tight” effect. Tong’s method is different.
In “The Totally Isolated Prediction”, in Barrie Richardson's Theater of the Mind, 1999, p. 160, he reports having learned the masking idea from George Boston, circa 1946, who used it for a “Bill in Balloon” effect. Richardson does not credit Boston with its invention. Building off of this method, within the next few years Richardson came up with its application to a prediction effect.
See also: Fogel's Headline Prediction.