Friday, April 16, 2010

Here We Go Again

Once again, we see the word "unexpectedly" being used in conjunction with a monthly move in consumer sentiment/housing/jobs reports.

I'm not sure what it would take to banish this word as it pertains to short term variance in noise-laden indexes. The article features this nugget re: Consumer Sentiment: "Economists surveyed by Bloomberg News had predicted the index would rise to 75 this April (preliminary)from 73.6 in March (final). The Index was at 73.6 in February, 74.4 in January, and 72.5 in December."

In order for something to be unexpected, there needs to be a sufficient degree of expectation.

Is that warranted for the monthly number on consumer sentiment?

You might as well argue how many Angels on the Head of a Pin or How many licks to get to the center of a Tootsie Pop
Statistical navel-gazing of this sort isn't merely silly as I mentioned here, it's counterproductive. It draws people into a pattern-seeking mode and into a destructively short-term focus that causes bad decisions.

Do yourself a favor. Resist it.

-Dr. Frank

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