Complete and utter claptrap. It’s really getting quite annoying. Greg Canavan reckons it’s ‘just like in 2006’ – nobody knows what’s really going on.
Whether it’s data, surveys or opinions, all the information being pumped out in the financial media news is complete gobbledygook. But that doesn’t stop anyone from churning it out. The results are enough to make you go cross eyed.
Here’s a sample of a month’s worth of data and opinions from the media which prove facts are about as objective as toilet paper preferences:
The Sydney Morning Herald quotes Barclays economist Kieran Davies: ‘The stage is set for a solid recovery in housing. Affordability is now about as good as it has been over the past 30 years…’
But on the housing affordability index, you only have to go back 3 years to find better affordability. Then there’s the ABC with their headline ‘Housing unaffordable across the board’. And according to Demographia’s annual survey, ‘Australia second only to Hong Kong in housing unaffordability stakes.’
Confused? The Barclays economist isn’t finished yet: ‘Loans to investors are climbing at their fastest pace since 2003…’ The RBA points out that ‘Home loan growth weakest in 36 years.’ And ‘Housing credit grew by 4.9 per cent in the year to July – the weakest annual growth rate since the Reserve Bank began tracking home loan activity in 1976.’
If we can’t figure out the affordability and lending side of things, what about savings? The Herald Sun claims ‘… consumers continue to squirrel away their income, with growth in deposits exceeding growth in lending for the 21st consecutive month.’ But at the same time, the SMH reports ‘Australians are abandoning banks and ploughing their savings instead into real estate and the sharemarket.’
Speaking of the share market, what can we expect from our stocks next year?
‘UBS analyst Abby Macnish expects the S&P/ASX 200 to be 8 per cent higher’ while ‘the Australian strategist for Nomura, Tim Rocks, said the market would likely be sitting about 4200 points – representing a fall of 8 per cent.’
‘The economy’s recent strength, highlighted by a rising inflation rate,’ while, ‘Inflation rate seems to be at the lowest level since early 2010.’
Taking the obfuscation cake is this statement in the Australian: ‘… the results renewed fears that China’s economy could be headed for trouble, despite recent signs of a strengthening.’
Huh? Weakening or strengthening, which is it?
There’s more: ‘The equities market had been trading strongly ahead of the data, but the release of China’s trade numbers prompted sentiment to weaken immediately.’
Make up your mind! Katy Perry explains the Chinese economy in her song ‘Hot N Cold‘:
‘You change your mind Like a girl changes clothes
Yeah you PMS Like a bitch, I would know
And you overthink Always speak cryptically
I should know That you’re no good for me
”Cause you’re hot then you’re cold You’re yes then you’re no
You’re in then you’re out You’re up then you’re down
You’re wrong when it’s right It’s black and it’s white
We fight, we break up We kiss, we make up
‘You! You don’t really want to stay, no
You! But you don’t really want to go-o
You’re hot then you’re cold You’re yes then you’re no
You’re in then you’re out You’re up then you’re down’
Sober Look‘s headline is ‘Japan officially in recession’ while the Australian is still worrying whether there might be a recession: ‘Japan has confirmed that the world’s third-largest economy shrunk in the three months to September, fueling fears the country is slipping into a recession.’
So how can you be in a recession if you’re still slipping into it? We’re not sure, but Shuichi Obata, senior economist at Nomura Securities in Tokyo, can top both claims. He explained that the coming recession that Japan is already in is also already over: ‘It’s likely that Japan’s economy hit bottom in the last quarter,’ he said.
Bloomberg clears up part of the confusion with this confusing fact: ‘A technical recession is defined as two consecutive quarters of contraction. Japanese recessions are officially defined by a government-charged panel that considers data beyond figures for GDP.’
Ah, a government panel, that’s why it makes no sense.
In Germany, they can’t figure out recessions either.
‘While German growth is expected to cool off through the rest of the year, investors think the country will be spared an outright recession,’ according to ZEW director Wolfgang Franz.
CBS News got a little confused itself while trying to confuse the optimistic investors:
‘Germany, engine of Europe, faces looming recession.
‘A recession – defined as two consecutive quarters of shrinking gross domestic product – has likely already started in Germany.’
Once again, a country is facing something that has already started, while investors reckon it won’t happen at all.
Germany’s central bank jumped in on the befuddlement with a complete contradiction: ‘The Bundesbank cut its growth forecast for the nation and said that Europe’s most successful economy is likely to enter a recession next year…. it emphasized that Germany’s economy is fundamentally in “good shape”‘.
Ah yes, the good shape of a recession. Maybe Germany is overweight…
If you’d like to add to our growing collection of bizarre contradictory media stories, send any you find to firstname.lastname@example.org. Whether it’s the mining boom that is already over but needs to be taxed, or the housing shortage that wasn’t, we’d love to hear it.
Hopefully you realise just how ridiculous the financial media is. There are three things you should keep in mind when you read the financial news.
- At some point, the opposite will be true. No matter what the claim is, at some point it will be ‘disproven’ by a new story.
- Facts and data can be interpreted in any way. That’s why there are so many employed economists.
- Your investment strategy cannot be based on what you read. It has to be based on what you think. In other words, you have to be able to form that investment strategy without any influence from current affairs. Otherwise you’ll be changing it all the time. That’s what gets inexperienced investors into trouble.
By the way, Greg may have said that nobody knows what’s really going on, but that hasn’t stopped him from figuring what’s going to happen. As he puts it, ‘the fuse is lit’. Find out where it leads here.
Until next week,
Markets and Money Weekend Edition
ALSO THIS WEEK in Markets and Money…
The Australian Banking Behemoth
By Dan Denning
The share price of Australia’s biggest battling bank is up almost 25% this year. That’s a tidy little capital gain in a blue chip stock, before profits. But something tells us that just as BHP Billiton became a proxy for the commodity story, CBA has become a proxy for the ‘yield’ story. The ‘yield’ story is the story of desperate savers and investors.
The Price of Risk in the Stock Market
By Murray Dawes
Looking at the chart you can see that the financials are rallying strongly at the moment. But the small-cap stocks are not being taken along for the ride. The resources stocks have also underperformed since the start of the year, although they’ve picked up some steam over the last month. Basically we’re seeing the outcome of the US Federal Reserve’s ZIRP (zero interest rate policy).
Don’t Bet on Saudi America
By Bill Bonner
The real effect of cheaper energy, in the US, will be to allow policymakers to make a bigger mess of things. They’ll shift more of America’s real wealth to the zombies. They’ll go deeper into debt. They’ll print more money. The US got lucky. Its energy entrepreneurs found ways to squeeze oil and gas out of stone. Pretty nice trick. But sometimes good luck is the worst kind of luck.
The Gillard government is proposing to consolidate Australia’s various anti-discrimination laws into one big one. Mind you, we have no problem with any law that protects individual liberty. But this is a law that does the opposite. If left unchanged, you’ll have a law that leaves it up the Australian Human Rights Commission