Things are seldom what they seem. We often see a statistic out of context and attempt to divine its meaning.

Retail Sales released on Friday is my example.

Fed Chairman Ben Bernanke celebrated December 7^th by giving a “where the economy is going” type speech at the Economic Club in Washington, DC. He said in part:

Recently we have seen some pickup in economic activity, reflecting, in part, the waning of some forces that had been restraining the economy during the preceding several quarters. The collapse of final demand that accelerated in the latter part of 2008 left many firms with excessive inventories of unsold goods, which in turn led them to cut production and employment aggressively. This phenomenon was especially evident in the motor vehicle industry, where automakers, a number of whom were facing severe financial pressures, temporarily suspended production at many plants. By the middle of this year, however, inventories had been sufficiently reduced to encourage firms in a wide range of industries to begin increasing output again, contributing to the recent upturn in the nation’s gross domestic product (GDP).

Far too many Americans are without jobs, and unemployment could remain high for some time even if, as we anticipate, moderate economic growth continues.

– Fed Chairman Bernanke 03DEC2009

I hope you are enjoying a wonderful Thanksgiving weekend. Depending on who you are, this holiday period will be spent differently:

• This is the Super Bowl of retail weekends, and retailers are going flat out to make a year’s worth of profits in just a few days.
• The upper floors at major banks may be burning the midnight oil to get a handle on their exposure to the Dubai $80 billion “stand still” default on its debt.
• For investors, this becomes a quiet period to reflect and develop a plan for the weeks and months ahead.

All of us want to make a lot of money with the least-possible risk. But the doom talk should frankly freeze your investment decision processes like a deer caught in the headlights.

When Fed Chairman Ben Bernanke speaks, I listen. The Federal Reserve oversees the American economy, and it is insightful on how the Fed views our economic conditions.

In an address this week, not only did Chairman Bernanke provide little new insight – this is the first time I have felt he was misleading in some of his points.

It’s popular to pick a letter of the alphabet to describe the likely course of the economy. The letter I would choose doesn’t exist in our alphabet, but if I were to describe it, it would look something like an “L” with a gradual upward tilt of the base. With such a slow rebound, unemployment could well stay high for several years to come. In other words, our recovery is likely to feel like something well short of good times.

- San Francisco Fed President Janet Yellen, 10 November 2009

Data are what they are. I do not cherry-pick economic releases – I try to analyze all released reports that were issued during the week.

I work at not biasing data – although this is an impossible goal as we all have some degree of bias that escapes into our analysis. My bias is that I want to be the person who makes money – not some hedge fund manager, congressman or Federal Reserve official.

The September 2009 Chicago Fed National Activity Index (three month average) rose again last month but remains below the historical marker which confirms a recession is over. In my opinion, this is the best indicator in economics land.

I came across a definition this week from Bank of Tokyo Mitsubishi concerning recovery.

If real GDP grows 3% or more in the first four quarters after the recession, then this is counted as a V-shaped or fast recovery. If it takes two years for real GDP to get up to 3%-plus speed then this slightly slower recovery is called a U-shaped recovery.

Pick the correct answer from the list of true facts:

The preliminary numbers for retail sales for September 2009 show:

Investors need advance economic warning on the economy. There is only one game in town – that is Economic Cycle Research Institute (ECRI) Weekly Leading Indicator (WLI). I publish this index weekly.

Our economy is 80% non-manufacturing.

This week the Institute of Supply Management (ISM) released their September 2009 Non-Manufacturing Report on Business indicating for the first time that this business sector was expanding for the first time since January 2008.

The weekly initial unemployment claims data this week showed a dramatic improvement.

The world is not black and white - especially economics.

With so much at stake, you will not be surprised to know that, over the years, many very smart people have applied the most sophisticated statistical and modeling tools available to try to better divine the economic future. But the results, unfortunately, have more often than not been underwhelming. Like weather forecasters, economic forecasters must deal with a system that is extraordinarily complex, that is subject to random shocks, and about which our data and understanding will always be imperfect. In some ways, predicting the economy is even more difficult than forecasting the weather, because an economy is not made up of molecules whose behavior is subject to the laws of physics, but rather of human beings who are themselves thinking about the future and whose behavior may be influenced by the forecasts that they or others make. – Fed Chairman Ben Bernanke on May 22, 2009

This is an interesting recession.

In the past I have postulated the various possibilities of the type of recovery we would face – L, U, V, or W.

The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period. - The board of directors of the Federal Reserve - Federal Open Market Committee (FOMC) meeting statement this week

This week The Conference Board released their leading and coincident indicators for August 2009. Their Leading Economic Index (LEI) is still rising like a rocket ship, and their Coincident Economic Index (CEI) is strangely flat even though it has been five months since the LEI went ballistic.

I spent the earlier part of this week with shipping executives at the Digital Ship Singapore 2009. The focus of this conference was on broadband satellite interfaces with the worldwide shipping fleets, but during the many breaks and liquid entertainment segments, there was adequate time to talk shop about maritime market conditions.

Fed Chairman Ben Bernanke Saying the recession was probably "technically over" this week has put my imagination into overdrive.

I am keying off of the word “technical”.

The National Bureau of Economic Research (NBER) through its Business Cycle Dating Committee determines when recessions begins and ends. The last recession they dated was from March to November 2001 which is sometimes called the dot-com recession. The rationale of the NBER for choosing these specific dates can be viewed here.

In choosing the dates of business-cycle turning points, the committee follows standard procedures to assure continuity in the chronology. Because a recession influences the economy broadly and is not confined to one sector, the committee emphasizes economy-wide measures of economic activity. The committee views real GDP as the single best measure of aggregate economic activity. In determining whether a recession has occurred and in identifying the approximate dates of the peak and the trough, the committee therefore places considerable weight on the estimates of real GDP issued by the Bureau of Economic Analysis of the U.S. Department of Commerce. The traditional role of the committee is to maintain a monthly chronology, however, and the BEA's real GDP estimates are only available quarterly. For this reason, the committee refers to a variety of monthly indicators to determine the months of peaks and troughs.

Consumer credit is down in July 2009 based on preliminary data. The headline splashed about was that credit contracted over 10% annualized between June and July.