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Conventional Wisdumb

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  • Mar. Industrial Production: Unchanged vs. +0.3% expected, +0% prior. Capacity utilization 78.6% vs. in-line with expectations, 78.4% (revised) prior.  [View news story]
    What's fascinating to me about this number is that we are still below levels reached in 2007.
    Apr 17, 2012. 10:11 AM | Likes Like |Link to Comment
  • ICSC Retail Store Sales: -1.0% W/W, vs. +0.5% last week. +3.2% Y/Y, vs. +4.5% last week. The retail sales softened due to Easter over and amid unseasonably cool weather.  [View news story]
    "amid unseasonably cool weather"

    I mean seriously, is this a joke?
    Apr 17, 2012. 10:07 AM | Likes Like |Link to Comment
  • "Our members are realigning their expectations somewhat until they see more actual signed sales contracts," says NAHB Chairman Barry Rutenberg of the first decline in the builder confidence index in 7 months. "Interest expressed by buyers has yet to translate into expected sales activity," says the group's chief economist. (PR)  [View news story]
    Richard,

    Considering you live in the bubble world of DC, I am not surprised. I think that the fact that the economy is so strong due to all the lobbyists and government employees is a metaphor for what is ailing the country.

    Here in FL, houses cost a lot less than they did in 2002 so I would say that it is cheap based upon recent prices - down 60% from the 2007 high. A new housing development in my area once featured homes in the "mid $600's", those same homes which did not sell the first time are now being featured as the "low $300's".

    AZ, CA, NV and a lot of other places are pretty cheap compared to their highs so I am not sure if we are using the same definition of "cheap" but that's what Case-Shiller is showing.

    Houses still might be expensive rather than grotesquely overpriced but I don't have an opinion on that.
    Apr 16, 2012. 01:04 PM | 1 Like Like |Link to Comment
  • "Our members are realigning their expectations somewhat until they see more actual signed sales contracts," says NAHB Chairman Barry Rutenberg of the first decline in the builder confidence index in 7 months. "Interest expressed by buyers has yet to translate into expected sales activity," says the group's chief economist. (PR)  [View news story]
    I guess confusing warm weather with buyer interest might have raised expectations beyond the real underlying demand.

    Houses are so cheap right now, which is a good thing, that I wonder how these homebuilders can compete in the long run.

    I don't follow the sector but I imagine they must have really downsized to survive.
    Apr 16, 2012. 10:26 AM | Likes Like |Link to Comment
  • Mar. Retail Sales: +0.8% vs. +0.3% expected, +1.1% prior. Ex-auto +0.8% vs. +0.6% expected, +0.9% prior.  [View news story]
    Bbro,

    Definitely a good number. However as you know, the seasonal factors of warm weather that everyone has been discussing are confusing some of the clarity of the overall strength but having said that it still looks pretty good.

    The question is whether the weather really was a catalyst in drawing sales forward and April and May will tell us the answer to that question.

    Based upon the market's reaction it seems like the good numbers were already priced in.
    Apr 16, 2012. 10:21 AM | 1 Like Like |Link to Comment
  • The various bailout programs used to fight the financial crisis may end up earning a profit for taxpayers, Treasury officials predict. Although losses from TARP are forecast at $60B and those from the rescue of Fannie and Freddie at $28B by 2022, earnings from Fed programs are projected to reach $179B through FY 2015.  [View news story]
    I love government math!
    Apr 15, 2012. 08:48 PM | Likes Like |Link to Comment
  • Weighing The Week Ahead: Will Earnings Disappoint? [View article]
    Jeff,

    "I don't see why 2007 should be the litmus test for a system any more than other recessions,"

    Well since it was the worst recession of our lifetimes and very nearly a total global meltdown the absolute inability of these tools to predict it certainly seems meaningful to me. As far as I know, ECRI was the closest to nailing the start date while Dieli was a bunch of false positives starting in 2005 as per your prior article on the subject.

    A discussion with you is the most cost-effective form of education I have encountered :)

    Thanks for the insights. I always learn a lot from our conversation.
    Apr 15, 2012. 06:01 PM | 1 Like Like |Link to Comment
  • Weighing The Week Ahead: Will Earnings Disappoint? [View article]
    bbro,

    I don't think I have ever been insulted in Latin before so I appreciate the originality.

    I don't get your point but you rarely write in coherent thoughts more like fragments of thoughts but thanks for coming out. Perhaps you should spend time working on the craft of writing as it would make your comments a lot more interesting and informative.

    Here's some writing tips:

    http://bit.ly/IVm4VW
    Apr 15, 2012. 05:31 PM | 1 Like Like |Link to Comment
  • Weighing The Week Ahead: Will Earnings Disappoint? [View article]
    Jeff,

    Post hoc ergo propter hoc.

    "what about the ECRI? Without any notice they went to a 100% forecast"

    Exactly how do you apply a weighting in a composite recession forecasting tool in which one of the sub-elements has a 100% probability of the event occurring?

    Currently the SuperIndex has a recession forecast of 0% in the next 6 months and it is composed of nine composites which includes ECRI. Assuming they are equally weighted, the forecast should be a minimum of 11% based upon the weighted average.

    ECRI is a blackbox it cannot be included as a discrete variable and it makes the whole regression worthless.

    I guess I am not as eloquent on the subject as Taleb is in "Fooled by Randomness" and the subject is far too complex to cover in blurbs but any reliance upon this type of quant modelling especially like this is flawed. Each model is better evaluated on its own rather than compiled.

    What if ECRI is right and the other 8 are wrong? What probability do you assign to that?

    I would like to see what the actual forecast was in December 2007 not the backtested version so if you can supply that data it would be helpful.

    This model may be mathematically elegant but it is logically flawed. I don't think the concept of synergy - the sum of the whole is greater than the parts - is meant to apply to statistical analysis but perhaps I missed that lecture.

    http://bit.ly/HLa8ok
    It is a: "deus ex machina [1] Latin: "god out of the machine"; plural: dei ex machina) is a plot device whereby a seemingly unsolvable problem is suddenly and abruptly solved with the contrived and unexpected intervention of some new event, character, ability, or object.

    Yes I know I am a pain in the ass but I do love a well-argued and candid debate. I can't help myself :)

    Thanks for taking the time to respond. I greatly appreciate it.
    Apr 15, 2012. 04:10 PM | 1 Like Like |Link to Comment
  • Weighing The Week Ahead: Will Earnings Disappoint? [View article]
    Jeff,

    "They have been very fair to the ECRI, generating a better signal from the public record than the ECRI does itself!"

    That's exactly the point in my opinion. I am not saying to exclude them because they are inaccurate, I am saying to exclude them because they should stand alone.

    By including them, you are adding their "accuracy" to the mix and then using that to compare it back to them again - seems like quite a circular argument to me. What does the accuracy look like without ECRI?

    The ideal is to compare ECRI to the index without ECRI since ECRI is the only one forecasting recession.

    None of what you have mentioned above would counter the problem of the inaccuracy of real-time unrevised data that occurs prior to recessions and is most evident at turning points which is what ECRI uses as its differentiating point.

    This is just an even bigger black-box than the one ECRI uses. These quant methods create a very false sense of security.

    "Data: Uncertainty, Error, and Confidence"
    by Anthony Carpi, Ph.D., Anne E. Egger, Ph.D.
    http://bit.ly/HOlLsx
    "Uncertainty is the quantitative estimation of error present in data; all measurements contain some uncertainty generated through systematic error and/or random error."

    Anyway I appreciate the feedback.
    Apr 15, 2012. 12:56 PM | 1 Like Like |Link to Comment
  • Weighing The Week Ahead: Will Earnings Disappoint? [View article]
    Jeff,

    "I am a big fan of Dwaine van Vuuren, whose excellent statistical work is giving us better insight into a wide range of recession forecasting methods. The data point that I cite each week (the four-month recession outlook) is only one aspect of a comprehensive report. The SuperIndex includes nine different methods, including the ECRI."

    Here's a link to the chart:

    http://bit.ly/INpCWk

    and the discussion about it:

    http://bit.ly/HK4bK9

    I just question the idea in general of averaging statistics to come up with a statistic considering the statistics themselves are all based upon differing methodologies. This gives the appearance of certitude but I question whether you could call this a statistically "valid" approach to forecasting.

    Using ECRI as part of the subset and then comparing it to ECRI does not make sense to me. It would be better if it were done sans ECRI so that we could see the forecast side by side and draw a more direct conclusion.

    Finally these charts are all back-tested based upon the revised data set after NBER has looked at the relevant stats a year or two after they occurred. So the real question is what the indexes looked like using unrevised stats especially in view of the fact that the "then current data" in the pre-2008 recession approach was massively wrong. I suspect that the unrevised numbers would create a different story as they say hindsight is 20/20.

    From FT Alphaville in Oct 2011:

    http://on.ft.com/nKG9hi
    "The data didn’t just fail in that crucial fourth quarter of 2008. They failed to warn that the economy had grown more slowly throughout 2007, had stopped growing in the fourth quarter of 2007, and had begun a steep decline by the third quarter of 2008. And that steep decline, hardly captured at all in the estimates released in December 2008, was from a lower base than was believed at the time."

    "What we have is a situation where the quality of real-time data can only be assessed with a huge amount of hindsight — the inputs are bad enough that only by scrutinising the outputs years later do we have some sense of whether a report is meaningful. Ideally, of course, you’d see vast improvements in the collection of the source data itself — or the identification of better source data."

    What do you think?
    Apr 15, 2012. 12:21 PM | 2 Likes Like |Link to Comment
  • Weighing The Week Ahead: Will Earnings Disappoint? [View article]
    "who is on the warpath against penny stock promoters. This problem does not get the attention it deserves. The get-rich schemes are always tempting. Losses in stocks and real estate have made matters worse. You might think that only foolish investors could be taken in, but you would be wrong. Some very intelligent people are among the victims, including friends who would not listen......"

    The whole crowdsourcing investment initiative is going to create one hell of a lot of fraud, even though in theory it is a great idea. I just suspect that the negative unintended consequences of this idea may overwhelm its positive results.
    Apr 15, 2012. 12:13 PM | 1 Like Like |Link to Comment
  • Weighing The Week Ahead: Will Earnings Disappoint? [View article]
    bbro,

    Doesn't changing from a weekly or 4 week moving average to a "52 moving average of non seasonally adjusted initial jobless claims", turn a reasonably predictive leading indicator and turn it into at best a coincident or lagging indicator?

    Isn't the 4 week moving average more sensitive to changes in economic trend? Isn't this sensitivity more useful from an investor's point of view?

    Thanks
    Apr 15, 2012. 11:56 AM | 1 Like Like |Link to Comment
  • Best Buy (BBY) details the 50 stores (out of about 1,100 total) it is closing in the U.S. Most of the stores will close by May 12. "This was not an easy decision to make," reads the PR. "We chose these stores carefully and are working to ensure the impact to our employees will be as minimal as possible."  [View news story]
    sam,

    http://bit.ly/IJJ7DQ;highlight=
    Apr 15, 2012. 11:44 AM | 1 Like Like |Link to Comment
  • The jobless rate might have fallen to below 8% by now if Congress had approved President Obama's proposals to increase infrastructure spending and to provide money to prevent the firing of teachers, says Gene Sperling, the White House director of the National Economic Council. Still, 2.1M private sector jobs were created last year.  [View news story]
    bbro,

    http://bit.ly/IXgCgx

    "The sign "The Buck Stops Here" that was on President Truman's desk in his White House office was made in the Federal Reformatory at El Reno, Oklahoma."
    "In his farewell address to the American people given in January 1953, President Truman referred to this concept very specifically in asserting that, "The President--whoever he is--has to decide. He can't pass the buck to anybody. No one else can do the deciding for him. That's his job."

    It may be unfair, but we always pin failure on the man at the top - the CEO.

    With this President the buck always seems to stop somewhere else. Did Winston Churchill whine about Neville Chamberlain?

    He may have the worst leadership skills I have ever seen in a public management figure. He certainly is not what you would call a "Level 5 Leader" in the "Good to Great" criteria.
    Apr 15, 2012. 11:13 AM | 4 Likes Like |Link to Comment
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