Scooped by Muckdog
On our blog agenda there is a discussion of the "alternate data universe."
There is a rich and thriving discussion of economic data among economists — that would be the "real economists". We are talking about those who are (preferably) in the academic world or working on Wall Street.
There is another discussion. It occurs mostly in the cottage industry of those making a business of criticizing the official government data. As we have noted, government is an easy target. The only representatives who speak in public are the political actors. The hard-working, non-partisan, intelligent staffers do not have any access to the media. That makes organizations like the BLS an easy target. They are not paid to go on CNBC.
Attacking the non-farm payroll report, GDP, or inflation data is an inviting target for the gonzo-economists, the non-economists, and those with a paid-site business model.
We were looking for a way to describe this "alternate universe" and even had the Twilight Zone in mind, but we were scooped by Muckdog. (Regular readers of "A Dash" sometimes ask why we recommend Muckdog, with whom we have never spoken, when his source seems to lack the official credentials we admire and is also anonymous. The answer is simple. We are not advocates of credentialism. We do hold anonymous sources to higher standards of helpfulness. We include them among featured sites when there is a real investment payoff.) Muckdog gets to the point much better than we would:
From Barry Ritholtz: GDP Alternate Measure.
It’s the whole conspiracy theory thing about understating inflation and
overstating GDP. Maybe "alternate universe?" Sure, but those make for
good Twilight Zone and Star Trek episodes, no? And Barry’s always a
The Choice for Investors and Traders
It is pretty simple. One can go into the Twilight Zone where no official report means anything — there is always something wrong. The prime source for this, which we will not link to, is a paid site on a mission. The serious economists do not cite this source. The bearish non-economists frequently do so. The mainstream media, with a couple of exceptions, do not travel this path. It is a trail which requires certain dubious assumptions:
- "Government" is some unitary actor, like the manager of a business, with a mission of punishing certain people — mostly senior citizens, in an effort to cut costs and balance the budget.
- The Boskin Commission was some sort of conspiracy with this aim in mind.
- Various Administrations and the Fed have joined forces to foster this approach.
In the beginning government classes students learn that we have a pluralistic society. Many different interests are represented, and quite effectively. Senior citizens have a special pull with Congress, since they represent a powerful voting block.
In fact, the Boskin reforms, discussed in a bipartisan Commission, have been reviewed by economists. If anything, the adjustments to CPI are still inadequate. CPI remains overstated. As we have noted, that is what the Fed believes.
Investors have a simple choice. They can choose to follow the alternate universe, where everything has gotten much worse over many years during a time when wealth increased. This is an ideological choice, not an investment choice.
Alternatively, investors can accept the debate among real economists, those trying to generate accurate data, and those offering real public policy alternatives about economic issues.
Like the many economic sources available on the Internet, we are not going to engage in a debate on specific calculations. It is too time-consuming to fight this battle when the alternative universe has this as a single-minded mission.
A trader or investor who wants to profit is well-advised to deal with the data generally accepted in the economic and investment community. If no one with real credentials chooses to engage in a discussion of the findings, that is meaningful and should be respected.
An Anecdotal Afterthought
Our mission at "A Dash" is helping investors and traders. We were in some doubt about whether this was an important issue until we had a recent visit from one of our most intelligent and informed investors. He asserted that some of these issues were "controversial."
We were surprised. We suggested an analogy of the debate over cold fusion. This theory, suggesting a potential for vast energy creation, was almost universally disputed by a broad spectrum of scientists. Nonetheless, it won popular support, some grant money, and some academic followers. This was a controversy principally among non-scientists.
There is plenty of room for debate over data and findings. Unless you are yourself an expert, your mission should be in discovering and following the real experts.
That is what we do at "A Dash."