Lying Out Loud—–How The Wall Street Spin Doctors Abuse The Numbers

by Mark St. Cyr

There’s an old saying that “numbers don’t lie.” However, when I apply simple common sense to the way I hear numbers spun across the financial media what doesn’t add up is precisely that: the numbers.

Once again I was left slack-jawed countless times as I heard one after another economist, analyst, chief investment big bank guru, et al tout their reasoning and pontificate why we’re on the verge of breaking out of this stagnant economic malaise of sub 1% GDP prints.

The reasonings were laughable when applying common sense rather than math skills to the arguments. Yet, as I’ve stated and wrote before. When it comes to this set of supposed number mavens: “They can add – but they can’t put two and two together.”

One argument now being proposed to help bolster the projections that Q2 will be closer to 3% as opposed to the abysmal print of Q1 is (even as the Atlanta Fed. is now predicting the same if not worse) that this jump will be fueled by (wait for it…) “Cap-ex spending relating to the bump up in crude prices over the recent weeks…” (insert rimshot here)

This wasn’t coming from some ancillary small fund manager. This line of thought and analysis was coming from one of our “too big to fail” taxpayer-funded bail-out houses of financial acumen.

As this “insight” was simultaneously broadcast throughout television and radio, heralded as “This is why we have people like you on – for exactly this type of insightful analysis and perspective.” I couldn’t help myself but to agree. For this is what “financial” brilliance across the financial media now represents: Financial spin.

My analysis? With analysis like this? Taxpayers better get ready – again!

This objective “seasoned” analysis is being professed by one of the same that expected the prior GDP print to show “great improvement” based on “the gas savings made possible from lower crude prices.” The result? If the build in inventory hadn’t been “adjusted” in formulations Pythagoras would marvel at – the print would have been negative.

So now you’re being led to believe with the recent rise in crude prices: drillers, refiners, etc., etc., are going to load up on cap-ex only months after many have scuttled rigs, buildings, employees, and more? Again, soon enough to effect Q2?

If cap-ex can be effected that soon, and to that degree as to pull GDP prints from near negative to 3% in a single quarter all by itself – as every other macro data point is collapsing? Why would lower gas prices have ever been wanted let alone touted as “good for the economy?”

I’ll just remind you that this “insightful analysis” was coming from one of the many who loved to tout endlessly how the U.S. economy is based on “consumer spending” and “more money in consumers wallets based on lower prices at the pump was inevitable.” All I’ll ask is: when does “inevitable” materialize? Before? Or, after the next revisions?

Again, now since it’s been shown that the “inevitable consumer” spent nothing of their gas savings to help prop up the prior GDP. (sorry I forgot, yes they did in higher health insurance costs) Where the case was made to bludgeon any doubters of their analysis: i.e., “lower crude prices resulting in lower gas prices = more consumer spending.” We are now supposed to embrace the inverted narrative where: “GDP for Q2 will show growth of around 3% based on higher crude prices resulting in increased cap-ex?”

Maybe it’s just me since some in the financial media refer to people like myself who question their reasoning as “idiots.” Doesn’t that calculation (as well as the conflicting narrative) render their previous argument they’ve professed ad nauseam: GDP growth in a consumer based economy is hindered by high gas prices – moot?

For if higher GDP expectations is now predicated on higher crude – than higher prices paid by the consumer at the pump is the answer to our whoa’s – not the other way around. Is it not? Oh yes, plus the added driver of increased insurance premiums. No additional car required. Remember: It’s not math – It’s magic!

Again, using the logic chain espoused by the so-called “smart crowd” the afore example is absolutely well within their “reasonable expectations of analysis.” My analysis? Sure, as long as it’s your money at risk – not theirs.

The above math is not erroneous. However, when it’s used to obfuscate the true meaning of those numbers where deception is more in line rather, than explaining the true calculations? Then my saying of “If the numbers don’t lie then…” takes on far more “truth in numbers” than the projections as well as their quantitative analysis would portend.

If you doubt this; just change the premise (or narrative) but keep the numbers the same. i.e., “We calculate and project GDP growth to triple from here. Up from under 1% nearer to 3%…” to “We miscalculated and our projections were wrong for Q1 by as much as 300% in the wrong direction, from a projected 3% print to a now less than 1% with possible revisions to negative” and you are far closer to the truth. For that is where, “The numbers didn’t lie.” Because if the truth be told, for Q1 – that’s precisely what happened.

As egregious to the sensibility of entrepreneurs, business people, and others everywhere. It’s far from the only example. And for my money one of the worst offences used is: The relevance to past data sets and their implied meanings to today’s since the emergence of QE.

This is when I have my most imaginative sessions of imitating Elvis. No, not on stage. Rather, when he took his frustrations out while watching a television.

Here is where “cherry picking” numbers takes on a whole new meaning nevermind qualitative “apples to apples” relevancy.

Of all the data points used across the financial media, the rationale to compare one set of data points (e.g., comparing numbers from any prior multi-year period to today) is so outrageously comical, it borders on near criminal assault to one’s common sense.

I hear one after another so-called “brilliant economist” or “top-tier analyst” tout data points, or sets such as, “Well back in the 70’s from 1972 thru 1978 this metric was identical to where we are now and then we rocketed higher in GDP growth, employment, blah, blah, blah.” (You can use any data sets you like for example; they’re all the same. i.e., If not the 70’s it’s the 80’s, or 50’s, or 20’s, or 30’s etc., etc.)

Before the advent of QE these data sets were relative to extract some quantitative analysis. Today? Rubbish. They’re like comparing cherries to pineapples. Sure they are both fruit, but other than that they are far from anything “similar,” And using them in a form of “quantitative” analysis without mentioning nor adjusting for “relevance in qualitative” objective analysis is just outright malfeasance in my opinion.

Before QE and the outright intervention of monetary policy directly influencing stocks – people bought stocks reflective of the economy. Today? Central Banks across the globe are now openly manipulating markets as a “matter of policy.”

The dwindling volume along with the capital outflows that has continued since the beginning of the financial crisis as the markets once again set new all time historic records proves prima facie, without adjusting for that metric alone (e.g., QE) and it’s quantitative, as well as qualitative impact (if it could be calculated) all – and I do mean all – relevance to prior economic examples is outright “junk science.” Or better yet: Outright bunk. Period.

Who cares (except for one whose salary is based on the commission paid if one buys in) what the numbers were in any given data set relative to the advent of QE? They are meaningless.

Just like a 5.4% print in unemployment is outright “voodoo economics” when used when trying to extrapolate what an economy did when 5.4% was measured at any time prior without the qualitative adjustment of what 5.4 today actually means relative to 5.4% ten, twenty years ago, let alone even further.

This type of extrapolation I hear now so often is insulting. And this comes from people touted as “smart” while they proclaim us as “idiots.”

Here we are, once again at “never before seen in human history” highs. Yet, since the ending of QE last November – the markets have virtually gone nowhere.

Over this same period GDP expectations have not only been ratched down, they’ve been revised from prints of abysmal – to pathetic.

Various social media stocks that were touted as the bastion of “everything is awesome” indicators have dropped like “dead canary’s” overnight after reporting “earnings.” Some losing near 30% and have yet to find any buyers at these now “On Sale” bargain prices.

What was once touted as “bad for the markets” (e.g., falling macro data points) is now touted as “great for stocks!” i.e. The Federal Reserve wouldn’t dare raise rates now.

Less real people making trades, and more HFT algorithmic front running means ever more “liquidity and stability” by those more involved with protecting their “cut” rather than the stability of our financial markets.

Just remember that other well-worn bromide they like to use when one ever questions their math: “It’s different this time.” And for their sakes as well as commissions – they had better hope so. Because, if we exclude relevant numbers as well as their qualitative measures. How does one square the circle today with the announcement as we once again hit never before seen heights in the markets – AOL™ is back in the news where merger, synergies, eyeballs, and ad revenues are once again the focus?

Do we use quantitive, qualitative, or both to figure out the implications for such a deal? Should we be nervous? Or, is once again: “Different this time?” And the “numbers” truly do add up.

Source: If Numbers Don’t Lie Then… |