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Okay, this is really just desperate and sad. No I am not referring to my fixation on parsing government numbers, although I suppose I could be, but instead to government statistical wizardry and the press' unquestioning rhetorical support for these tortured numbers.
First up, here’s the verbiage:
WASHINGTON (Reuters) -- New orders for long-lasting manufactured goods unexpectedly rebounded in February, rising for the first time in seven months, according to a government report on Wednesday that could bring some cheer to an economy mired in recession.
Here’s the NY Times’ opening take on the situation:
In a glimmer of surprisingly upbeat economic data, manufacturing orders for goods like metals, machines and military equipment rose last month for the first time after six months of declines, the government reported on Wednesday.
That’s quite amazing. Durables “unexpectedly rebounded,” bringing the cheer of “a glimmer of surprisingly upbeat economic data” to an economy mired in recession.
Well, it turns out that there’s another little game that is frequently played with these numbers and it’s called “the downward revision.” The game is played like this: In a prior month, in this case January, a slightly “better than expected number” is posted, causing the stock market to react with glee (at least temporarily).
Later on, that number is adjusted wildly downward, thereby creating a lower benchmark to “beat” next time, hopefully causing the stock market to again react with glee. I’ve been watching this “beat by a penny!” game played for years with both earnings announcements and government releases. The funny part is, it works every time. A friend of mine has dogs that he prefers to lock away in a back room when guests come, and he fools them into willingly entering that room with treats. It, too, works every time. That’s my mental image for this process.
At any rate, here’s the game in more detail. The first thing is to set the “expected number” off of the original reported number. In the example below I have arbitrarily set the baseline durables number to “100” for demonstration purposes.
As you can see below, the reported January number was “95.5” in this example and then economists set their consensus expectation for a final reading of 94.4 which was a minus 1.2 percent decline from 95.5.
Now that the expected reading of 94.4 has been set, the next task is to then lower the bar so that it can be easily beaten. Below we see two rows of example data. The upper row reflects the fact that the January data was revised downward somewhat heavily, to minus 7.3 percent. The lower row shows how the February data beat that revised number by 3.4%, which led to all the happy articles quoted above.
But with sharp eyes, we might note that if economists expected a reading of 94.4 but we got a report of 95.9, this only represents a difference of 1.6%. This is a LOT lower of a difference than the reported difference between minus 1.2% and plus 3.4% which is a gap of 4.6%.
Further, we might say that since the data is so noisy and since February will almost certainly be subjected to revisions, that we shouldn’t compare “reported” to “revised” at all. Instead we might want to compare “reported” to “reported.” What happens if we do?
Then the surprisingly cheery gain evaporates into statistical insignificance.
Put graphically, the “cheer” reported by the media seems comical and overreaching, and possibly desperate and sad. I’ve taken the liberty of using a red arrow to point out the source of cheer.
Source: Briefing.com
It also bears noting that the durables number is a very noisy data series, and any and all monthly “wiggles” are really not worth focusing on. The year-over-year change, however, can be quite revealing.
On that front, February 2009 orders were down 28.4 percent from the year prior.
One might question how an economy based on exponential expansion will fare with such a wrenching downward adjustment, instead of the expected and preferred percentage gains.
Also, one might wonder how Jiminy Cricket has managed to sneak into so many press rooms all at once.
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The market ticker has been very interesting today and I can't help that despite all this "good" news the markets were dropping.
This morning Derrenger posted this : The End Game Approaches
He gave an optimistic 6 months but then later today he posted this:
Bond Market to Bernanke and Obama: F*ck you
No matter what kind of lies the papers spew out it can't work anymore. The fundamentals are sooo bad any attempts to make it look good are failing. Time to start stocking up on fundamentals.
Gold production is going down and dollar production is going up... isn't there only one thing that can happen? Gold is money.
Then again, maybe it does and that's that's the problem.
Also, if we all just wish hard enough upon a star, all our dreams will come true.
Chris,
You are the man.
This work you offer is invaluable. If only our journalists had one-tenth of your analytical capabilities and devotion to the truth.
Our public schools don't train us to think, and unfortunately, most of us don't. It's beyond me how a journalist can read the census data (from your last post on new home sales) and not notice an 18.3% margin of error. It's even more incredible that they could fail to point out that home sales last Feburary were worse than any month on record.
That is almost criminal negligence in my book.
Do these people even read the stories they write? Do they do any research at all? Do they think about it for one second?
I'm absolutely confounded by the apparent ignorance and lack of integrity of the mainstream media. Not surprised by it - just continualy blown away by its boundlessness.
Also, one might wonder how Jiminy Cricket has managed to sneak into so many press rooms all at once.
You took the words out of my mouth. With all that's happening...part of last ditch efforts that can't or won't work?
Also...do we really have a media looking out for us?
Nichoman
"Lord, give me the STRENGTH and WISDOM to see things as they are...not the way I believe they are"
-- Leonardo Da Vinci
"The important thing is not to stop questioning." -- Albert Einstein
Can we start picketing and coming up with solutions yet? Or do we still need to make more people aware?
Numbers like this are just ifuriating, especially watching Timmy and Bernanke say everything is going to be better when it is not.
Here is the AP wire spin - they do state the contrary opinions but the whole tone is positive - lipstick on a pig:
Business
Hopeful signs, but economy not out of the woods By MARTIN CRUTSINGER Associated Press WriterMar 25th, 2009 | WASHINGTON -- Glimmers of hope for the economy -- better home sales and higher demand for goods, plus optimism from the White House and a nearly 20 percent rally in stocks -- have some people wondering if the worst is over.
Not so fast, say many economists. Layoffs are still mounting and home prices are still falling in an economy shrinking at an alarming rate. A recovery anytime soon doesn't seem likely.
"We may be seeing the end of the beginning of this recession, but it is not the beginning of the end of the downturn," said David Wyss, chief economist at Standard & Poor's in New York.
Still, the recent news has been better than expected. On Wednesday, the Commerce Department said demand for big-ticket manufactured goods, which had fallen for six months in a row, actually rose by 3.4 percent in February.
And reports this week have shown sales of both new and existing homes rising by about 5 percent last month.
On Wall Street, the landscape looks better. The Dow Jones industrials gained about 90 points on Wednesday to close a fraction of a point under 7,750 -- an 18 percent rally from its low point on March 9.
And President Barack Obama struck a more hopeful tone during his televised news conference Tuesday night. "We're beginning to see signs of progress," Obama said, adding that Americans should have a "renewed confidence that a better day will come."
"The good news is that we don't have the sort of unrelentingly persistent declines we had been seeing," said Nariman Behravesh, chief economist at IHS Global Insight, who thinks the economy "may be approaching a bottom."
The GDP fell at an annual rate of 6.2 percent in the fourth quarter. Behravesh expects an even more severe decline for this quarter, and even a slight positive by the end of this year.
For now, in five key areas of the economy, there are both signs of life and reasons to believe the worst is not yet over.
history rhymes
Also, if we all just wish hard enough upon a star, all our dreams will come true.
Hm. What happens when the stars go out? The figurative sky seems pretty dark at night these days. But the MSM doesn't seem to have noticed.
Viva -- Sager
"Show some !@#$%^ ADAPTABILITY!!" -- Sergeant Jack Shaftoe, USMC ("Cryptonomicon")
"It's all goin' *down*, man! Martha Stewart's polishing the brass on the Titanic!" -- Tyler Durden
"Have the courage to use your own understanding!' -- Immanuel Kant
"Dreams are the seedbed of the possible." -- William Greider
"One day you finally knew what you had to do, and began, though the voices around you kept shouting their bad advice." -- Mary Oliver
I have a friend, law school school graduate, pretty smart guy. He believes the party line hook, line and sinker. He assumes that the people in charge "are pretty smart people" and that they know what they are doing. He is pretty corrupt as a individual so maybe, just maybe, the amount of corruption in the hearts of the people is so pervasive that they are unwilling to face the truth and accept the consequences of our actions.
God destroyed Sodom and Gomorrah for these reasons: "These are the sins of your sister Sodom: she was arrogant, overfed, and unconcerned for the needs of the poor"
America is fat, arrogant as all hell, and could give two sh*ts about the millions living in tents and under freeways throughout the country.
George