I have to admit, the business news channels have maintained a brave front in light of the market’s yearlong selloff.
Looking at the year-over-year third quarter of 2022, the average retirement account lost 25%. (https://www.thehealthyjournal.com/faq/how-much-is-the-average-retirement-account-down-in-2022).
If you think the crash is over, consider that the Dow is down another 5% since November 30th and lost 1010 points just in the past five days ending Feb 24th. (https://www.wsj.com/market-data/quotes/index/DJIA/historical-prices)
In spite of this record-setting market crash, the business channels have remained relatively calm.
Compared to the CoVid, three week March crash of 2020, or CNBC’s “Mad Money” host Jim Cramer’s 2007 now infamous rant against the Federal Reserve which had somewhat of a panic flavor to it, in the last year on Bloomberg, Yahoo Finance and CNBC have had what I perceive as surprising lack of real concern during this whole mess.
Whether it’s from the slow-burn quality of this year-long stock rout or the fact that news channels are supposed to remain calm, it can be soothing to tune in to one of these channels while your stocks bleed red.
That said, I am concerned that much of the analysis supporting an imminent market recovery is based on backward-looking and therefore flawed data.
Last week, those predicting a soft landing and a robust recovery in stock prices often mentioned that consumer spending is still strong. They argue that the interest rate increases and the persistent inflation we’ve seen are doing little to dampen consumer demand. Henceforth, everything looks fine and a new bull market may be right around the corner.
The issue I have with that claim is that they are basing the whole argument on spending that has already happened. Subsequently, there is no way of knowing if everyone is just starting to cut back at this point in time. I can tell you I sure am. And in talking to others, they are too.
Sometimes boots on the ground coupled with a little astute observation are better than the economic statistics from the Bureau of Labor Statistics (BLS) which is the entity that puts out such data.
Some argue the BLS is just a shill for whoever’s in the White House at the time.
After all, incumbents live and die by the state of the economy and inflation and employment data are a huge part of the economic picture.
Over many decades, the BLS has frequently changed the numerous inflation and employment statistics. Every administration since President Johnson way back in the 60’S saw changes to the way the BLS measured things.
In fact, the BLS just changed it again. (https://www.bls.gov/cpi/notices/2022/methodology-changes-2022.htm)
Usually, the changes are in favor of softening the negative data while enhancing the positive stuff under the guise of giving us a more accurate picture.
Realistically, they can’t say “oh by the way, we’re changing how we measure things to make you feel better”.
It’s the reason why, on occasion, we hear a politician say this particular thing is not as bad or that particular thing is improving. Then we wonder what store they are shopping at or that they sure haven’t visited our neighborhood.
Fortunately, instead of plowing through historical data and searching out all the changes the BLS has made, a statistician named John Williams runs a website called “Shadowstats.com” and they measure things the same way they always have been measured them.
The website describes itself as:
“A service that exposes and analyzes flaws in current U.S. government economic data and reporting, as well as in certain private-sector numbers, and provides an assessment of underlying economic and financial conditions, net of financial-market and political hype”
I have interviewed John and he seems to be a matter-of-fact type of guy and one akin to honest and level-headed answers.
Some argue the website uses older calculation models and doesn’t reflect the changing world around us. Others say that’s the point. If we want to see how inflation and employment change over the years, we have to use the same measuring stick. Change the measuring stick and you change the result.
But to Washington, I guess that’s the point. Monkey with the metric to give you a better result which helps the incumbent administration.
And don’t think I am picking on either party or a particular president.
I’m not, because they have all done it and for more times than you know.
“Watching the markets so you don’t have to”
(As mentioned please use the below disclaimer exactly) THANKS (Regulations)
This article expresses the opinion of Marc Cuniberti and is not meant as investment advice, or a recommendation to buy or sell any securities, nor represents the opinion of any bank, investment firm or RIA, nor this media outlet, its staff, members or underwriters. Mr. Cuniberti holds a B.A. in Economics with honors, 1979, and California Insurance License #0L34249.