Market pundits always try to explain modest changes in the broad averages. Today their stories are all wrong.
Today, the most important statistic came from Jack Hough at Smart Money
The Story
Hough did a piece on the credibility of government statistics. It is a nice job compared to most prior discussions. He provides a viewpoint on each of the key issues, citing arguments from the BLS and the principal conspiracy theorist.
It would be interesting for investors to read the entire article and also to read the supporting documents from the conspiracy guy and the BLS.
Almost no one will do this, since they are too lazy to do any real work. We are now addressing to the handful of people still thinking and reading.
Of the few who try, most will not be able to evaluate the arguments, since it requires some understanding of data analysis to reach a real conclusion.
It is possible for someone to sell snake oil and the reader will not know the difference.
Basically, it comes down to how people feel about government. Most students enter college -- we know, we taught them -- with a negative bias. They see movies. They make the mistake of thinking of Congress -- 535 people with different motives, coalitions, and partnerships, as if it were a rational unitary actor. Simple and facile interpretations can be persuasive.
The Data
As observers of the investment scene, we have documented a long-term process of dis-information. To our amazement, the story was even worse.
The data show that 85% of readers do not believe government data. Wow!
This is an astounding result. We knew that the big-time blogs were unduly influential. We knew that the mainstream media sources accorded undue recognition to the extremists. We also knew that every time we discussed government data in a positive light, we got hate mail -- both aggressive and plenty of it.
We are still astonished. Normally the highest people in socio-economic-status (SES) also have a higher score on questions related to Confidence in Government.
But it is an online poll -- tracking an audience known to be unrepresentative, wealthy and conservative. Does this matter? What interests us here is that the unrepresentative sample is so far out of touch with reality.
To Summarize
The data are complex. We believe that any of the Internet pundits (name your candidate) or the conspiracy guy would be beaten like a drum if engaged in a fair fight with someone from the BLS or another suitable representative.
BEATEN LIKE A DRUM. Any media source wanting to try this could do it.
We cannot cover this in one article, but it is an open challenge to government critics. Any time, any place.
Investor Implications
Many individual investors are attempting to monitor economic developments. There is a choice in data sources.
You can take information from one of two sources:
The first source consists of career professionals whose salary and benefits have no relationship to politics. They develop methods and write articles for peer-reviewed journals. Their career chances depend upon professional performance as evaluated by others in the field. You already pay millions of dollars for this information.
The second source has a profit motive. None of the assertions are reviewed by peers or published. Everything plays upon emotions and pre-conceptions. There is plenty of support from bloggers who share these motives.
To us the choice seems obvious. When we learn that nearly everyone disagrees, it makes the trade even more attractive.
