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Blogger NO RATINGS 
Nice look beneath the surface Fred.
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Platinum NO RATINGS
Automated trading is on the rise. Using numbers like these as inputs, trades are made automatically with no thought to whether the numbers are right. This is a cautionary tale.
 User Rank
Iron NO RATINGS
ProfR,
Is this automated trading done directly by individual investors or the brokerages? User Rank
Blogger NO RATINGS
The Census Bureau projects the US population will be 312,780,968 on New Year's Day -- an increase of 2,250,129 or 0.7% from a year ago and 1.3% more than the total population on Census Day, April 1, 2010.
In January 2012, one birth is expected to occur every eight seconds in the United States and one death every 12 seconds. Meanwhile, net international migration is expected to add one person to the U.S. population every 46 seconds in January 2012. The combination of births, deaths and net international migration results in an increase in the total US population of one person every 17 seconds. Cuddle up!  User Rank
Blogger NO RATINGS
Thanks Noreen, good stuff.
I continue to believe that demographics and population will be the number one driving factor in the economy. Think about it: Japan and Europe are perpetually sluggish because of rising debts and a dwindling and aging population. So far, the U.S. has fended off some of these problems but our population is now aging so we are falling into the same trap -- fewer younger people to support a rising aging class. There would be no social security problem without the baby boomers. If there were more young people rising up in the working class, it wouldn't matter. So really the question is can the U.S. find a way to continue population growth, either through immigration or births. Population growth has driven the ecomomy for 100 years or more.  User Rank
Platinum NO RATINGS
Good insight Fred! It just goes to show that figures lie and liars figure!
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Gold NO RATINGS
Thank you Fred for helping us read between the lines. This has really opened my eyes. I will think twice when reading a report the next time and taking what is said at face value.
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Iron NO RATINGS
I think it is always a good idea to be skeptical of any data from the government or special interest goups. It is amazing how data can be manipulated to bolster a governmental agency or special interest groups agenda.
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Platinum NO RATINGS
I think these days we just call it politics.
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Blogger NO RATINGS
It's a shame that we can't just call it "information" anymore.
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Iron NO RATINGS
It is still "information" but it needs to be viewed with a skeptical eye.
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Blogger
I appreciate your comment, thank you Phoenix. It is my cherished hope to have an effect on the acceptance or rejection of misinformation. There is another dimension too.
A source of information currently misleading the public is the use of comedy and glib writing to conceal the fact that there is no substance to the message. We can all call to mind a "comic" or a funny writer who makes us laugh while destroying someone or something he does not like without offering a single word of evidence. They can be recognized easily since their message is always amusing and destructive and is never supportive. It is simply sarcasm or ridicule and I leave it to you to come up with the perpetrators of this form of character assassination. I give Saturday Night Live a pass for using comedy since that is their avowed purpose and they apply it in a reasonably evenhanded way. But I do not give a pass to those with obvious agendas that they attempt to hide from those they are trying to influence using glib attempts at humor. User Rank
Blogger NO RATINGS
Fred,
The data is always manipulated but it always comes out in the wash. I think it's more important to watch private data. One thing I've seen lately is that for the first time in many quarters, there were more downside earnings revisions than upside earnings revisions. For that reason I think how the stock market acts in 1Q 2012 will be a big harbinger of the rest of the year. Everybody always gets giddy during an upside earnings cycle but they forget how painful and lengthy it can be on the downside. That being said, can these coporations please do something constructive with all those profits! User Rank
Blogger NO RATINGS
You're right Scott, phony data does get corrected from time to time. However, the revisions are done at least annually and are not limited to just one year back. The data I presented was revised back 5 years and I guarantee that it will be revised again.
Unfortunately, the damage is done in the present and the data is corrected afterwards. If lies affect the election it will not change things to have the truth come out a year after it's outcome is history. Let's all agree to call a lie a lie and not use the silly excuse that "it's just politics." That's no different from calling a thief a needy person and giving him a house and a car that you pay for for the rest of your life. User Rank
Blogger NO RATINGS
Fred,
Don't get me wrong, I agree with you. The government statistics have major flaws, the greatest of which is the "Birth/Death Model" in the employment statistics which basically add or subtract 100s of thousands of jobs based on misinformed conjecture. We would probably be better off if the government just eliminated the data, now that I think of it. Wouldn't the market be healthier if it just relied on private data rather than government-manipulated statistics? I think one of the big problems over the last 20 years is the government thinking that they can control every aspect of the economy. There are a buch of academics watching screens always overreacting to their own data. Think of Greenspan and 2002 and the housing bubble. It's like trying to oversteer a Ferrari -- if you don't known what you are doing you crash the car. User Rank
Blogger NO RATINGS
I know we agree philosophically Scott, but I would prefer more rather than less information. I would not be happy if the data were withheld as you suggested. I am able to make some sense of it and would only have the words of politicians if they did not give me some numbers which I can check with some effort and understand with some thought.
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Blogger NO RATINGS
fair enough.
I guess I am more cynical than you, Fred, as my expectations of seeing integrity from government agents are not high... User Rank
Blogger NO RATINGS
LOL
There is no one more cynical than I. I just looked up last week's report from the DOL and found the following: "In the week ending December 17, the advance figure for seasonally adjusted initial claims was 364,000, a decrease of 4,000 from the previous week's revised figure of 368,000." However, this week they revised the 364,000 to 366,000 so instead of the decrease of 4,000 initial jobless there was a decrease of just 2,000, so it was half as good as they reported. This week they reported an increase of 15,000 new jobless and I will gladly book a bet that it will turn out to be more than that after next week's revision.  User Rank
Platinum NO RATINGS
Love it, @Fred! Plus, what is the sampling error on these numbers? Gotta be more than 2,000, right?
Two thousand as a percentage of either 364,000 or 366,000 is roughly half of 1%, which might as well be ZERO in my book! User Rank
Blogger NO RATINGS
As a former federal employee, I have no hesitation suggesting the following: Take all government data with a grain of salt.
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Platinum NO RATINGS
Noreen, is that because we can expect a government agency to massage the data? Or because they are not capable of collecting all the right data? Or both?
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Blogger NO RATINGS
I found the level of competency among government workers ranged from exceptionally high to abysmally low. The high performing workers often went out of their way to correct errors and omissions in data provided by some of the less committed workers. But when you consider the amount of data being gathered -- and the fact that it is often gathered by one person, working without much oversight -- you can see the potential issues.
If one person, working alone for as low as $12 or $13 an hour -- intentionally or inadvertently -- surveys the wrong household, enters data incorrectly, fails to explain a question correctly or misunderstands the question she is asking -- then the results could be compromised. Yes, there are certain quality checks in place. But they don't catch every error, or every lie. User Rank
Blogger NO RATINGS
I guess I didn't make my point clear Street Smart. The error is nominally very small as you point out and as I wrote in my post, but the announcement emphasized the change between weeks not the total amount. The improvement last week was originally given as 4000 and then revised to half that amount when nobody was looking.
They announced twice the improvement that actually occurred and they have done that in 56 out of the last 58 weekly reports! To me that is a significant fabrication that is probably designed to mislead. User Rank
Platinum NO RATINGS
Oh, no @Fred, I totally got your point and I thought it was really an interesting illustration of the "make news with the numbers now, revise them later" phenomenon.
I was making the additional point that the DOL's numbers were suspect to begin with. When you're dealing with an original number that is 1% of the total and then revise it to .5%, I'm just questioning the statistical accuracy of the original 4,000 number. In other words, the DOL is saying that not only does it know exactly where the needle in the haystack is; it then knows when it becomes half a needle. Impressive if true, but I'm dining at @Noreen's salt lick! User Rank
Blogger NO RATINGS
Oh, sorry I misunderstood your point Street Smart.
I certainly understand the difficulties in sampling data, but there is no way to make an error in the same direction 56 out of 58 times if you are honest. An honest data collector would at the very least subtract the average systematic error from the data and present that as his/her estimate. Simply doing that would present a number much closer to the final revised figure. User Rank
Platinum NO RATINGS
You are ABSOLUTELY right, @Fred! 56 out of 58 is NOT an aberration! They didn't know that they were dealing with the Data Whisperer when it came to YOU looking at the numbers, that's for sure.
Final score: Fred 1; DOL 0 I say this early and often but it bears repeating: We are SO LUCKY to have access to your insights! User Rank
Iron NO RATINGS
Does anyone take acountability for these revisions (lies/mistakes) or is just protected behind the face of government as normal course of business?
User Rank
Blogger NO RATINGS Not only does no one take responsibility, but they have grown to expect it. Here is a note I received in response to my post from a very long time friend and associate of mine. I am very fond of him but I am not pleased with the "ah shucks" attitude of which this is an example: "We commodity traders have been dealing with this since I was in the business in 1965. One year I lost well over 50k on a supply demand government report which was way off the mark. One firm, who had to report their grain supplies on hand, had the normal person on vacation and a secretary filled out the report to the government for their data and she missed about half of the locations she needed to include. It was an honest mistake. The next month the report was still not corrected. It took about 3-4 months before they figured out the 'accounting error' made by a secretary for one firm. "On crop condition reports, many county agents put in their numbers and they can say anything they want. They are closing that loop. "I personally try not to dwell on reporting errors or manipulation of data. Hell, corporations have been doing it for years." I can accept that honest mistakes are occasionally made, but making the same mistake 56 out of 58 reports cannot be accepted. In my view it is an attempt to mislead the nation in order to enhance chances for reelection. I know the excuse is "everyone does it," but I will reject it whenever I see it and will try to expose it to potential voters whenever possible. User Rank
Iron NO RATINGS
Guess I just don't understand how they get away with it. They have a 3blast yr long grand jury for a baseball player saying one lie in front of congress but lying to citizens is overlooked. Frustrating.
User Rank
Iron NO RATINGS
*3 year long
User Rank
Blogger NO RATINGS
It is frustrating. i can't speak for a public company, but I can tell you in terms of government data that it is difficult to watch what you know is subtle or not-so-subtle manipulation of the facts and have little or no recourse, in spite of whistleblower programs.
User Rank
Blogger NO RATINGS
Maybe there's some hope yet -- assuming someone in a company/agency wants to take responsibility. Consider this prediction:
The increased reach of U.S. whistleblower laws and a growing interest overseas in whistleblower programs will make 2012 the Year of the Whistleblower, predicts Phillips & Cohen LLP, a law firm that has specialized in representing whistleblowers for nearly 25 years. A harbinger of the year to come can be seen in the flood of whistleblower submissions the Securities and Exchange Commission received in the first seven weeks after it adopted the final rules for its new program whistleblower reward program created by the Dodd-Frank Act. From August 12 to Sept. 30, the SEC received 334 whistleblower submissions. As a result of Dodd-Frank, the U.S. now has four whistleblower programs that offer substantial rewards to private citizens who expose fraud against the government, investor fraud and foreign bribery by corporations: The SEC's and the Commodity Futures Trading Commission's programs created by Dodd-Frank; the Internal Revenue Service's whistleblower reward program for claims exceeding $2 million; and one for Medicare fraud, defense contractor fraud and other types of fraud through the "qui tam" (whistleblower) provisions of the False Claims Act. User Rank
Platinum NO RATINGS
Statistics have been spun since the age of cave paintings, but I think what's really scary is the role of the mainstream media in giving credibility to invented data.
Somehow the newsworthy version gets reported and neither the corrections nor the opposing points of view ever make it into the sound bite do they? User Rank
Platinum NO RATINGS
News is reported too often - daily or even hourly. This causes an over-emphasis on the data that was just released. Monthly unemployment numbers, minute-by-minute stock index changes, consumer confidence, retail sales, whatever - is mostly noise in the best of cases.
Knowing that much of the just-released data isn't quite right just makes it more important to base investment decisions (and voting decisions) on more than what's in the news. The reporting about unemployment is an example - most stories recently seem to be about how the unemployment rate declined by 0.1% or new jobless claims are up (or down) slightly. I don't hear much perspective about the reality that the unemployment rate remains high and the recent changes are small. User Rank
Platinum NO RATINGS
Yes, it is important to take a longer term view when looking at investments. Being influenced by the latest number will cause a lot of useless trades.
User Rank
Platinum NO RATINGS
Another way that the media exacerbate the problem of reporting statistics is in trying to explain why the markets performed as they did on a given day. Some talking head will inform us that the Dow is down because "the market was looking for" X and it got Y instead.
But efficient market theory would suggest that those expectations and even the statistics upon which they are based would already be reflected in the market, if not 100%, then certainly a great deal. So, it's like a hall of mirrors--the media explains how statistics moved the markets and the media explanations themselved become factors in market movement. Chicken, meet egg! User Rank
Blogger NO RATINGS
Street Smart,
Exactly right. One of my frustrations with "financial journalism" is that most financial journalists have never traded or even invested and really don't know much. They often fall back on easy assumptions and "spurious correlations" that are easy to make with little statistical proof. I.E. "Today the market sold off for XYZ." The bottom line is that you can never prove much of anything unless you have a large statistical database from which to test. On any given day the market action is what it is because millions of buyers were being matched with millions of sellers. Making an assumption about what each and every one of them was thinking -- or even what the "majority" of them were thinking -- is somewhat absurd! Maybe a bunch of them just had to sell or buy! User Rank
Platinum NO RATINGS
EXACTLY, @Scott! Or in this day and age of high-frequency program trading and increased market volatility , maybe the computers just had to sell or buy! Financial journalism really reached its point of total absurdity when it tried to explain the Flash Crash!
User Rank
Blogger NO RATINGS
Yes, thanks Fred. I hearby vote this the #1 discussion thread on IU in 2011.
While we're at it, let's not just blame government officials. Let's talk sell-side analysts. I would guess if you are a data cruncher it might be better to take the other side of their recommendations on a trade, especially given that at any time they rate less than 5% of stocks a sell. In fact, after the whole 2000 bubble implosion/Sarbanes Oxley/Regulation FD nonsense, it appears that things have gotten worse... earnings projections and results have gotten MORE volatile, due to the poor forecasting ability of sell-side analysts and "Chief Strategists." I wrote about it here, take a look at the charts and the data. Earnings estimates/market reactions have become more extreme peak/trough: http://www.investoruprising.com/author.asp?section_id=1287&doc_id=232420&image_number=2 After looking at that chart, it should give you doubt when the top sell-side strategists claim that S&P earnings of $100 per share can be maintained throughout 2012. User Rank
Blogger NO RATINGS
You nailed it Scott, the earnings estimates for the S&P 500 are off more than any data offered for our consumption. This is the reason I became a technical analyst rather than a fundamental analyst.
At least we can depend on the Wall Street Journal to provide accurate volume, advances and declines, highs and lows etc. The earnings are revised by a bigger factor than anything I look at. Thanks, too for the kind words. User Rank
Platinum NO RATINGS
Imagine that- Wall Street More honest than the government.
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Blogger NO RATINGS
I don't know why the surprise, half of government was trained by Goldman Sachs
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Blogger NO RATINGS
LOL Fred
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Iron NO RATINGS
Not totally unbelievable. At least Wall Street is accountable to investors and the SEC to some effect.
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Platinum NO RATINGS
This is the reason I became a technical analyst rather than a fundamental analyst.
@Fred, thanks for the post. To be frank I had believed more in fundamental analysis rather than technical analysis. But after reading your article I am forced to change my opinion. User Rank
Iron NO RATINGS
There should a commitee just to review revised numbers. Can you image if companies were allowed to revise their numbers? Let me revise my taxes.
User Rank
Blogger NO RATINGS
Companies do revise numbers. They call them "restated earnings."
In June 2010 the headline of a news item was: "Dell to restate earnings due to accounting fraud." That's just the most obvious situation. A couple of months ago there was an article headed -- "Traders Dump Office Depot for Restated Earnings" -- Forbes.com. Let the buyer beware. User Rank
Iron NO RATINGS
Maybe we should invest in churches.
User Rank
Blogger NO RATINGS
What denomination?
:>) User Rank
Platinum NO RATINGS
Bullseye,
I think we should invest in churches of all denominations - we need better morality and ethics in business. User Rank
Blogger NO RATINGS
A little more ethical behavior would go a long way, wouldn't it?
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Platinum NO RATINGS
I know there have always been schemers and liars in business and government. But it sure seems like that type of behavior has become more acceptable than it used to be.
 User Rank
Platinum NO RATINGS
Lying and cheating used to be something done more discreetly. Now the liars and schemers brag about their exploits. Remember the arrogance of the most recent ex-Ill governor to go to jail?
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Iron NO RATINGS
You're right - I see it as more evidence of entitlement and arrogance
User Rank
Blogger NO RATINGS
This information in support of my post came from today's economic report:
The US Census Bureau reported minor changes in private residential and nonresidential construction, the former moved up and the later turned lower. Public construction has been falling at around an 8% annual rate since June with total construction flat at 0.14% annual rate. What makes the news for me though is their style of reporting an example of which appears below.
The revision of the November data in December was a tiny amount -- just 0.15% -- but that tiny revision represents 14% of the reported "improvement." Even so, what I like the most is the footnote that specifies there was no change at all, but which will not stop the media from quoting the positve change and omitting the fact that there was really difference. User Rank
Platinum NO RATINGS
Within that context, the reporting of an increase is dishonest. They should report that "construction spending is unchanged" or that "changes in construction spending are not statistically significant".
It's made worse by the fact that many reporters can't or don't see the problem. User Rank
Blogger NO RATINGS
Absolutely, my point precisely.
User Rank
Blogger NO RATINGS
The data is in.
Last week the Department of Labor "reported an increase of 15,000 new jobless and I will gladly book a bet that it will turn out to be more than that after next week's revision." The DOL revised the number of initial jobless for December 24 was actually 387 thousand instead of the 381 thousand they reported a week ago. Consequently, the increase in jobless turned out to be 23 thousand last week instead of the 15 thousand they reported. Any guesses about how the revise the improvement of 15 thousand they reported for December 31? User Rank
Blogger NO RATINGS
Fred, you have probably answered this. But this comment thread is long and I have forgotten. But what I want to know is this: have the DOL numbers always been this fluid, or is it a problem that seems to be related to this particular administration?
User Rank
Blogger NO RATINGS
My impression is that it is currently at its worst because the employment numbers are so lousy and have been getting worse. As we get closer to the election the revisions are getting even larger and will continue in that direction in my opinion.
However, I only started to record the old and the new values each week a year ago when I noticed that the revisions were almost always in the same direction, so I cannot provide the data back more than a year. I'll try to uncover some older data to see if the problem has been getting worse as I suspect. User Rank
Blogger NO RATINGS
Thanks Fred. It's interesting stuff -- but, unfortunately, not entirely surprising.
 User Rank
Silver NO RATINGS
Things Fall Apart.
The blogs and comments posted on Investor Uprising do not reflect the views of Investor Uprising, PRNewswire, or its sponsors. Investor Uprising, PRNewswire, and its sponsors do not assume responsibility for any comments, claims, or opinions made by authors and bloggers. They are no substitute for your own research and should not be relied upon for trading or any other purpose. |
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