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Revisionist Economics

Revisionist Economics

| May 06, 2024

Being the bold visionary that I am, I wrote a blog in 2017 that became even more relevant over the weekend. In the literary masterpiece I said to ignore financial news for seven days. I list a few reasons and I would like to elaborate on one. 

"The financial news is irrelevant in another way as well. The facts are often wrong and the predictions even more so. When you hear first reports of a story, the facts are breathlessly screamed by reporters who later retract. They prognosticate about the economy, terrorism or politics. But only time will tell what’s fake financial news or fact. You don’t have to be on top of the financial news because the first reports are a waste of your time." Source: Me.

Economic reports are too often revised six months later. Typically, the revision tells the true story that would have hurt the financial decision makers at the time it was published.

Now before you accuse me of having a tinfoil hat and that I should trust the economic science, consider human nature. When we share bad news to our family and friends, we tend to soften the blow. If you ask your spouse if this shirt makes me look fat, she hesitates and says no. Technically, that is true because the shirt was not the cause. Gluttony, sloth and carbohydrates were the cause.

Later, while perusing social media, pictures of that shirt pop up and you realize that shirt looked like sausage casing. Your spouse gently revises her story and offers moral support and a heaping plate of mash potatoes.

Let me give you a real-world economic example. Do you remember “Transitory Inflation.” Using a coordinated chorus of White House and economic officials we were promised inflation was but a vapor caused by Ukraine or global warming and/or the price of tea in China.

Since then, my twin flame Janet Yellen has says “Sowwy.” As in all toxic relationships, we forgive her as we slurp down a $15 caramel macchiato.

Up until now, I’ve attributed incompetence to what could be malice. I’m starting to wonder if I’ve been a tad bit naïve. What if revising economic reports is actually the same stalling tactic we use on our spouse regarding the shirt whose buttons heroically fight to hold it together.

By the time, the financial analysts and retail investors come to the correct information, these masters of finance simply say, “Oh my, what a pickle. Don’t worry, we are hear to help!”

David Rosenberg sees a similar trend: “The revisions will not be coming for another six months and when they do get released, it will come as a shock to the Fed - and to the markets as well,' Rosenberg said of the downward revisions he believes are still to come in the months ahead.

'The Fed now intends to stay on the sidelines as it closely watches lagging and contemporaneous indicators that are littered with high error terms,' he added.

'And the longer it waits, the more it is going to have to do on the rates front.

'Shades of 1991, 2001 and 2008 [all over again.]'” 

The reason Rosenberg refers to past economic shocks is precisely because we have the benefit of time to parse exactly what happened. Wait until the fog of war has cleared and warm clay of data has hardened in the sun. Also, look around and trust your own opinion.

Your reaction should be to take every bit of good or bad financial news with a grain of salt. The markets will respond, sometimes dramatically. Your job is to stay the course. If you’d like to talk about your personal course, click here.