Where to Go When Things Don't Go the Way You Thought
Where to Go When Things Don't Go the Way You Thought
When things don’t go according to the predictions I’ve made, I struggle to figure out whether it is because the government data is wrong or because I’m wrong. To be fair to myself, I look for possible rigging in the data, such as frequent situations where all the good news came from “adjustments” when the actual raw numbers were deplorable. At the same time, I have to ask myself if I am trying too hard to make myself look correct, and sometimes I worry about that because I find so much apparent error or bad logic in the reports I look at yet I see no one finding it in the mainstream press to where I wonder if I am the only one who sees something as being an error. An article I’ll come to in a minute will show why and how one must struggle with that.
First, let me look at the stuff where if find the numbers are so rigged as to be fraudulent and I feel comfortable that I am not just letting myself off with an excuse. If, for example, I say inflation will rise, and it only minimally rises at such a low rate that it is invisible to many, but clearly would have been notably worse if not for a highly questionable “adjustment,” then I am comfortable with the fact that odd adjustment is at fault, and it did, at least, rise some, so it’s not my error.
The “adjustment” with health care that I’ve called attention to, is a good example of where the rigging was extremely apparent, even though almost no one in the mainstream press called the Bureau of Labor Statistics out on it. It was a massive adjustment in CPI carried out every month for an entire year where the Bureau of Lying Statistics said their sole reason for the adjustment was to reconcile for their past mistakes.
It all inured to the benefit of Powell’s mission and Biden’s wish to show improvement on inflation while keeping a “strong and resilient” economy. It reset insurance prices backward five years over the course of one year, making that entire one year look astoundingly good in terms of constantly falling insurance prices, even though real prices were rising all year. The reported decline in that area of inflation was entirely due to reconciliation for past errors that had nothing to do with actual inflation happening in 2023, other than to completely turn positive inflation into negative inflation (deflation).
At the end, you have to ask yourself, “If these guys made a mistake so atrocious over the course of the previous five years that they had to spread its reversal out over a full year, was the amortization because they didn’t want to show a one-month monumental plunge in healthcare insurance costs that would scream MISTAKE or because they wanted to reap the benefits of twelve months of potentially believable deflation for the sake of the Fed and the president?” Why amortize the correction of the error. Just get it down with, especially when that is what they usually do. You also want to ask, “If they could make mistakes that big every month for five years, why should we trust anything they tell us?”
So, with an adjusment like that, it’s easy to feel comfortable saying that inflation is not what they are saying it is because a large part of the good news is coming from just reconciling their past mistakes.
Now for the side where I have to question myself because it is the right thing to do when you find you are out of synch with most others who are writing about the strong economy and with the government reports. One article today, called “Cogent Analysis,” talks about how some people strain out gnats while swallowing camels—finding a tiny error to explain away their own large error:
How can you tell the difference between an analyst and an advocate? It is all in the handling of data that runs counter to assertion. To an analyst, being wrong is disappointing, but it is primarily an opportunity to learn—an expected element in a feedback loop of continuous improvement. When knowledge is your only objective, there is no such thing as a bad fact, only one which you do not yet understand. Not so for the advocate. The advocate has tied their hopes (and often their livelihoods) to a specific outcome and feels compelled, whether consciously or not, to rationalize away or attack inconvenient realities. It is advocacy when every perturbation in the weather is tagged as evidence of climate change, each squiggle of unfavorable price action is declared market manipulation, and no act or utterance from a favored politician is disqualifying.
Many people say they are objective about the facts but then don’t try very hard to be objective about themselves. The time they should try most to be objective about themselves in when they are squaring up their own apparent errors to show they were not errors: “The error was in the fake data.” I have to always ask myself if that is what I’m doing because I so often find error that is so grossly false it’s hard to believe they made a mistake that big or chose to be that misleading.
The article quoted goes on to make some salient points about the US miscalculating how its sanctions against Russia would impact Russia as well as how Biden’s changes on Liquid Natural Gas exports is propping up GDP and the economy. I recommend reading it, but my point here is to deal with its opening argument.
So, here is how I approach that problem of objectivity. Some things like my statement that we are already in a recession have to be squared or I have to admit they are wrong when GDP growth comes in as strong as it just did. I point to GDI and to the obvious manufacturing recession as data that confirms my view and blame faulty inflation (for reasons like the one I just gave) for “real” GDP, as reported, not being so real. Yet, I have to question whether I am trying too hard to find a rationale for being off, given that GDP is the primary way we determine recessions. Am I just making excuses for myself?
Well, I noted that historically whenever GDI has been recessionary with GDP running more and more positive GDP has corrected down to GDI. Still, that correction hasn’t happened yet, and there is no way currently to know if it will. If it doesn’t, then am I wrong, or did GDP just remain wrong? And, while “real GDP growth” is off due to a mere reconciliation that carried on for an entire year and reset healthcare insurance prices back to 2018, I have to admit that single albeit major error would not have turned the latest GDP growth report negative, had the “reconciliation” not happened.
If I were to also subtract from total GDP the amount by which housing costs in CPI were likely are off versus what CPI reported, would that enough to explain why “real” GDP growth was positive? Well, there is no easy way to compute housing costs, even if one points out, as I have many times, that asking owners to estimate what their house would rent for as a way of determining the change in the cost of homeownership is clearly ludicrous. Calculating the real impact of price inflation on all homeownership is hard because all homes are bought at different times and different prices, so how do you figure out the average change as well as average change in property taxes and average change in insurance costs?
Rents have gone up 16% nationwide, as one article today says. How many homeowners surveyed are even aware of that? Most don’t read economics. They’re busy taking care of the kids and having a life. Even if they all went by the latest rental data in their region, is there any really sound basis for saying the cost of homeownership is equal to the cost of rent? It is transparently ludicrous. Why don’t we, if that is the case, just take the change in rental values and apply that percentage directly to all homes used as the change in home ownership, and not add in the guess-factor errors of having homeowners provide their own guesstimate about rent, as if taking the news from a homeowner somehow makes it more likely to be a right gauge of homeownership as an expense?
Still, pointing out how wrong that is likely to be does not get one to a real cost of homeownership by which they can say, “See, the government data for CPI “homeownership” is off. It should be “X.” So, how do you know when you are just making excuses by saying “this healthcare data is grossly distorted by a year-long reconciliation last year that has totally distorted this year, too” plus “homeownership costs are a joke.” That’s not a solid argument because it relies on its own assumptions about what the real data should be.
Same thing with the BLS jobs data when you see the BLS constantly making strong jobs reports and then revising each report down month-after-month for a year to less impressive numbers.
So, here is what I do since I don’t trust the data but am in no position to calculate what the data really is: I point out the data that everyone is willing to trust, including me, such as GDI and the Fed’s regional reports on manufacturing, which are solidly recessionary. I point out the fact that almost everyone in the mainstream press is saying the jobs numbers don’t make sense, but accepting them for what they say anyway. And then I give myself a little more time to see if GDP does start to fall in line with GDI, and I note that some financial writers are now starting to say there are some incremental signs that inflation is rising and that Fed says it certainly isn’t sure the job is done and that it could rise; then, just to be fair to myself, I give a little more time to see if that trend that others are starting to talk about becomes clear to all.
So far, things overall are tracking as I expected, but not all data agrees. I can’t just give myself the luxury of cherry-picking the data, but I also cannot just let obviously errant-to-the-point-of-looking-rigged data go by without serous commentary because my whole purpose it to provide a clear path through the rigging. The proof that the path I present is the right one has to come from whether or not it leads where I’ve said it would.
So, with recession, my actual prediction was just that Powell would tighten us into one, not that we’d be in one right now; however, I’ve said along the way I believe we are in one right now and that it will become apparent. Powell is still tightening and has made it clear to all that he’s going to do it longer than than almost anyone thought. So, things are trending the way I thought, but some data sharply disagrees.
My prediction has also been the recession doesn’t go deep until things break bad, which I’ve said the Fed’s tightening will bring about. SO … so long as the tightening continues, there is time for the prediction of a recession to materialize quite clearly as well as the breakage. By the same token, if the tightening ends, and most of that doesn’t happen, then clearly I was wrong. So, for now I still have some time to see how it truly plays out. If the data is as distorted as I think, then the breakage will materialize. The data won’t be able to hide that because that happens in the forms of corporations going out of business, runs on banks and everything else you associate with financial collapse.
This week we saw more signs appear of bank breakage, which I’d love to go into because there are a couple of good stories about that, but I’ll have to save that for the Deeper Dive this weekend, as my writing time for the day is over and this article is long enough. There is also an interesting perspective on what has been happening in the labor market that confirms what I’ve said about the breakage, but I’ll have to save that for the Deeper Dive, too. It is all quite interesting, though, and it is all marching directly down the path I’ve said we’d find ourselves on.
(I’ve also placed those stories in boldface below if anyone wants to see where I’ll be going with this.)
Economania (national & global economic collapse plus market news)
Cogent Analysis: Those advocating a case for recession in the US have an energy blind spot.
Credit card debt increases by $50B to new record high
Stunning Collapse In Credit Card Debt Change As Average APR Hits New All-Time High
Record Large 10Y Auction Sees Stellar Demand, First Stop-Through In 12 Months
US Trade Deficit Narrowed Last Year by the Most Since 2009
S&P 500 closes near 5,000, notches record high as strong earnings continue
How Has The US Economy Remained So Resilient In The Face Of Much Higher Rates? Here Is The Answer
Real-Estate Rubble (housing, commercial & global real-estate bubble trouble)
The Real Estate Crisis Looming Over Banks
Janet Yellen: Some banks may be ‘quite stressed’ by empty office building trouble
BUST: Record number of Americans can't afford rent
Gun, abortion and LGBTQ laws are affecting where home buyers move, Redfin says
Overinflated from too much money & Underfed from too few goods (due to weather, sanctions or other supply issues)
Airline announces it will now weigh PASSENGERS as well as their carry-on luggage
Wars & Rumors of War, Revolts, Hacks & Cyberattacks (+ AI threats)
New Report Details Iran Closer Than Ever To Building a Nuclear Weapons
Four Russian Military Aircraft Detected Near Alaskan Airspace
Fake Biden robocall linked to Texas-based companies, New Hampshire attorney general announces
Meta to add ‘AI generated’ label to images created with OpenAI, Midjourney and other tools
Political Pandemonium & Social Senescence (major socio-political issues & events but not campaigns)
Ronna McDaniel, R.N.C. Chairwoman, Will Step Down
Section 3 aimed to keep Confederates from office — and future insurrectionists too
Inside Donald Trump’s Incredible Cash Crunch
Rank-And-File Border Patrol Agents Livid Over Senate Funding Deal
Behind the border mess: Open GOP rebellion against McConnell
House GOP erupts in fury over "embarrassing" and "shameful" defeats
Putin interview with Tucker Carlson shows Kremlin outreach to Trump’s GOP
Jumbled Joe Tries to Remember How to Talk and Who the Bad Guys Are
Calamity and Catastrophe
After waiting 12 years, this famed climate scientist fights his critics in court
You are NOT alone! I have been following the gold and silver markets for 44 years (1980). I have seen those numbers SO manipulated it isn't even funny! They are the true enemy of fiat money!
Try to tell that to people in the stock market and you will be laughed at! We are being lied to every day by our so-called leaders!
The article’s title describes exactly how I feel. Is everything so rigged that it’s just delaying the inevitable crash, or are we in a soft landing where I’m in denial??? When free market parameters are manipulated (ie stock market circuit breakers) it makes it tough to discern what is actually happening versus what SHOULD be happening. Smaller banks should have been dropping like dominos now, but it hasn’t happened. I can’t make heads or tails of any of it. The logic and analysis is the Daily Dooms and Deeper Dives make perfect sense, I just don’t understand why it’s not playing out the way the numbers are suggesting.