The corporate media's job is to sell confidence on Wall Street's numbers, rather than tempered or even depressed expectations, no matter how realistic they may be.
By Scott Thill, AlterNet
April 13, 2010
As Charles Dickens reminded us in his classic novel Great Expectations, the line between crime and cash is a continually blurry one. And it's easily manipulated by language and narrow self-interest.
For example, let's just consider the overly extensive use of one term: "Unexpectedly." It is especially ubiquitous in finance journalism, where it is repeatedly used to console a rightfully nervous readership that, while good news is a great expectation, bad news just seems to comes out of nowhere. Although I've been informally following this clumsy usage for years now since diving into the hazy, crazy world of finance, I've never run out of daily examples. Just plug the term "unexpectedly" into Google News on any given day, and neither will you.
Here's a few that Google coughed up during this writing: "U.S. Home Sales Fall Unexpectedly in Feb.,"ABC News reported. "French Consumer Confidence Unexpectedly Falls On Job Concern," Bloomberg News reported. "South Africa Unexpectedly Cuts Rates to 6.5%," the Wall Street Journal reported.
Unpacking any of these headlines should be simple enough for those who aren't economists, even without the benefit of reading the stories themselves. Nothing in the average American's life and salary, to say nothing of the lenders and companies he or she has to deal with, warrants the surveyed optimism of economists who think home sales should be going up, rather than down, in any given month.
Meanwhile, France isn't immune to our continuing global recession, which is being further enhanced by deepening unemployment and rising corporate profits. So it's no wonder the French don't feel like spending money, when they don't have jobs. And although you need to be somewhat savvy on international currencies and markets to suss out the meaning of South Africa's rate cut, it's not a stretch to look at the headline and guess, correctly, that the nation is trying to encourage demand for its stocks and bonds. In other words, none of these things are unexpected. They make sense and cents.
Except to economists and the traders they enable, both of whom lately have been blowing calls with incorrect predictions, at a major cost to all of us.
"We always use the terms 'expected' and 'unexpected' when a rate decision, earnings and other data emerge counter to our surveys" of economists, Bloomberg spokesperson Judith Czelusniak told AlterNet.
"For better or for worse, Wall Street is all a game of expectations," Paul La Monica, editor-at-large for CNN Money online, explained to AlterNet. "Stocks move based on how a number, be it an economic report or corporate earnings report, looks compared to expectations. That's an admittedly myopic point of view, but that's the way trading works."
Or doesn't. From ex-hedge funder Jim Cramer screaming at CNBC's Mad Money viewers to keep buying Bear Stearns stocks on the eve of its collapse, to the consensus of top politicians and economists totally missing the recession, and down to the current cheerleaders for our so-called economic recovery, the market has been a volatile mess for years because of suspicious expectations. Those unreliable sources and a great many other drinkers of guilt-free derivatives Kool-Aid thought they could keep shuffling stratagems and paper, and the market would just keep inflating. But anyone with an understanding of just the term "bubble" understands that it is defined not by its inflation, but its annihilation. If it doesn't pop, it isn't a bubble. End of lesson.
This unsustainable desire for prophets and profits has led us down some dark alleys, where reality has administered ceaseless beatings to our integrity and accounts. But not our perception, which as advertisers often say, is reality itself. For some reason, that desire for great expectations unmoored from reality perseveres, and remains enchanted by a political and economic paradise that is not only incorrect, but impossible. Instead of continuing to rely on those who can't seem to separate their perception from reality, we should be ignoring them outright. If anything, we shouldn't keep paying them for being wrong when it literally counts, which starts with the headlines and ends with our wallets.
"How someone can read a collection of forecasts, and from that deduce a lack of evidence of potential recession is far beyond me," said Barry Ritholz, financial analyst at the Big Picture and author of Bailout Nation, after Briefing.com's president Dick Green analyzed the prediction of "top Wall Street economists" in November 2007 and concluded that "there is no evidence of recession...there is no evidence of a broad credit crunch." That was mere months before the failure of Lehman Brothers and Bear Stearns. "It's disingenuous beyond belief," Ritholz added.
Perhaps, but Briefing.com, unlike many white-collar and blue-collar workers worldwide, still has a job, crunching numbers and surveying economists for financial publications like CNN Money and many more. It reaches millions of readers in 86 countries, and one hopes it doesn't have access to their bank accounts. But it's just part of a worldwide network of in-house and out-house analysts who filter economists' data and predictions for the media and other clienteles. And those predictions move mountains of money on a daily basis, often in the wrong direction.
As recently as last month, economists surveyed by Briefing.com blew the call on how many Americans would file for unemployment for the first time. In the week ending Feb. 13, they had expected it to slide down to 438,000, building on the previous week's upwardly revised 442,000. Instead, claims rose to 473,000, surprising probably no one but those economists responsible for influencing CNN Money's story "Jobless claims rise unexpectedly." The rest of us probably noticed that nothing in the nation's employment picture had improved or warranted the optimism. In fact, the previous week's tally had been revised upward, not downward, so an increase would make sense. It would be, in a word, expected.
After talking with CNN for this article, it changed tack and parsed April's alleged curveball more directly: "Jobless claims soar." Initial jobless claims ending the week April 3 hiked up to 460,000, 18,000 more than the week before. And that week was upwardly revised by the pained smilers at the Labor Department, who always manage to find crappy data they forgot to integrate before releasing their clumsy reports. But the paid analysts at Briefing nevertheless blew the call worse, expecting claims to fall to 435,000 rather than rise at all. Because we're in a recovery and all.
This isn't because they are terrible at what they do; their paychecks obviously posit the opposite. It is because their job is to sell confidence, rather than tempered or even depressed expectations, no matter how realistic they may be. And most of finance journalism is the engine of their function. They're also there to lend weight to the dizzy optimism that all markets, especially depressed ones, need in order to stay solvent, coax money off the sidelines, whatever works. And woe to you if you hook your vulnerable equity to their unreliable propheteering.
"Failure is a good thing," JP Morgan Chase CEO Jaime Dimon explained last October at the annual meeting of the Securities Industry and Financial Markets Association. "Everyone should be allowed to fall."
Perhaps, but repeated failure is a recipe for, well, failure. Readers of financial journalism would be wise to avoid attributing any meaning to the "unexpected" swings of the market, when what is only unexpected about those swings is that they were expected to not swing at ail, but stay on an ever-upward course. Avoiding so-called expert opinions altogether would be a wiser choice. Instead, investor and dilettantes alike would be better off crunching some common sense, and allowing their perception and reality to meet. A quick glimpse at the details and histories of their own lives and nations, and those around them, will illustrate all too clearly that we have a long way to go before business as usual returns.
And given that in the 21st century so far business as usual has been spectacularly destructive, who needs it? Ignorance holds far more bliss than the blown calls of geeks like Alan Greenspan who are more wrong than they are right, to the detriment of us all. Given the past performance of the media's prized economists, ignorance probably has a better track record.
"The financial press often gets too caught up in playing along with the Wall Street expectations game," said La Monica. "Bleak economic news can be portrayed in a positive light, because the numbers weren't as bad as expected. By the same token, good numbers are reported as surprisingly weak when they fail to meet lofty targets. The financial press definitely needs to do a better job of reporting about long-term trends, not just day-by-day gyrations in the market."
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