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Market Facts: More Important than Market Bulls, Market Bears or the Main Stream Financial Media.

Smiling reporter. Handsome smiling newscaster upholding his microphone and leading the news.
Spinning vs. Reporting

Below, we look at the Main Stream Financial Media and its role in market-spinning rather than market reporting.

No one likes a kill-joy. College frats hate police-raids; politicians hate independent “investigations;” tax-evaders loath accountants; and over-stretched armies hate seminal losses. In short, bad news is a bummer for folks doing bad things…

Which is why the branding arms of nations, frats, tax-evaders and compromised politicians swing into full gear to make “happy” perception trump dark reality whenever they are otherwise (and clearly) over their skis.

As Germany’s Wehrmacht faced annihilation in 1943 Stalingrad or Napoleon’s Grande Armee disintegrated on the 1812 “retreat” from Moscow, the press back home was buying time and boosting morale by printing positive spin…

Fake Financial News?

Not surprisingly, the same propaganda machines appear whenever financial markets are over their skis. The more absurd conditions get, the more spin kicks in. After all, markets thrive on bid orders, not sell orders. It’s critical to keep the “troops”—i.e. buyers (and demand)–happy. So roll out the cheerleaders.

But telling over-stretched investors, retirees, pension-fund managers and good-faith yet unsophisticated retail investors to “stay the course” or “buy more” in this current market backdrop is the moral equivalent of drafting children to fight a losing war.

In short, we need to consider the truth beneath the spin, because to do otherwise is wasteful and wrong. We say this not as market “bears”—in fact we aren’t perma bears. We are just market analysts with a deep respect for the blunt.

And sometimes, such as now, the evidence is just too clear, yet the news is just too, well: wrong…

The Financial Spin-Doctors, Or Main Stream Financial Media

This is glaringly clear to us with respect to today’s main stream financial media—or MSFM.

And today’s spin is nothing new. We’ve all seen this movie before.

If you were to look at the MSFM just years, months or days before raging bubbles imploded—from the crash of 1929, to the tech bubble of 2001 and all the way to the “Great Recession” of 2008, you’d notice that the uglier the conditions got, the brighter the media spin shined on the eve of disaster.

Remember Bernanke promising “containment of risk” and Greenspan’s infamous 06 declaration that “the worst is over” just before the worst began to really kick in? Remember the WSJ and NY Times puff pieces on the “ miracle” just before the NASDAQ 100 sank (peak to trough) by 83%?

And remember the Ken and Barbie “economists”  (at CNBC, Fox, NPR and even Bloomberg Radio) shrugging off—and at times even laughing at– credit experts like Paul Singer warning of a real estate crisis as early as 2006? Remember Larry Summers publically mocking Brooksley Born for warning us of the risks in the very derivatives markets which later crushed the 08 bubble?

Well, Here We Go Again…

From the network news to the, Fed, BLS and  Commerce Department, “happy” financial data—deliberately placed out of any semblance of context—is currently washing over us in a Goebbels-Pravda-like homage to form over substance.

It’s un-American to ignore these tricks, and in case you’re worrying I’m just being a bear, let’s look at the unpleasant math rather than the unpleasant theme of this post.

Real Estate “Good News”

Recently the Commerce Department just bragged about an October “surge” in housing starts of nearly 14%. Wow, that’s pretty happy news, no?

In fact, it’s pure spin.

Just look closer. The SAAR figure for October 2017 family housing starts was 877,000. The year before, that number was 871,000. So the monthly rate of “housing starts” YTY was 500 per month—hardly a “surge.”

Did that same Commerce Department mention that housing starts are still 50% below our pre-crisis peak, or that the number they reported for October is the same annual rate we had back in 1991? Furthermore, when one considers that the number of US household seekers has grown by 30% since 1991, the fact that the actual purchasing rate of those units has not risen at all in 25+ years is a bummer, not a “surge.”

And what about the “booming” rise in apartment units for October? In fact, this year’s figure is down 12% from last year’s figure of 447,000 apartment units. And in case this isn’t “perspective giving”—just consider that October’s monthly number was up 8000 units from September but down 4500 units from last October. In short, and depending upon which context you place the numbers—you can get them to say/imply anything you want…

The truth is, housing data flips and flops like a fish on a dock rather than “surges” like a rocket.

Numbers guys and statisticians know the drill. It’s all smoke and mirrors, akin to British Generals calling the battle of the Somme a glorious victory on bond tours yet neglecting the fact that the “victory” cost England over 1 million in dead and wounded sons.

But that’s how the history of “spin” works, from housing and stock markets to battle reports—slice and dice the data out of context and you can turn anything into a puff-piece.

It’s the Same with Earnings & Manufacturing Data

I’ve written elsewhere how Wall Street uses the same clever tricks to basically lie about earnings. It’s pretty shameless too—and right under our noses and right past our trusty “investigative market journalists,” who’d rather focus on headline-grabbing “surges” than sober facts.

The same tricks are now being used to discuss US manufacturing production. David Stockman recently deconstructed a WSJ puff piece to make a similar point. He reminded us that overall US manufacturing production is still 4.3% below our pre-crisis levels despite all the WSJ hoopla of “booming” productivity.

In fact, consumer goods production has flat-lined in the last two years and remains below our pre-crisis highs.

The data is just as bleak for manufacturing employment. From October of 2007 to April of 2010, the US lost 2.3 million manufacturing jobs—that’s 76,000 jobs a month. Since 2014, our so called “manufacturing surge” has resulted in new hires of just 6,000 per month. For the WSJ to call that a “rising tide” is like describing Harvey Weinstein as a “rising star.”

The Best “Trick” of All—Just Ignore the Data

But there’s even a better trick for market spinners today than just fudging the numbers or de-contextualizing the data. The best trick of all is simpler: just ignore the data.

One has to wonder, for example, why the Main Stream Financial Media doesn’t keep a daily or at least monthly score of US debt levels, deficits, GDP numbers, Federal Reserve Balance sheets, yield curve compression or GAAP PE ratios on the same kind of warning radar you’d expect on a Naval destroyer heading into a sea battle?

Why not? Because the truth would be its own market-maker—i.e. a market crasher…

How often, for example, have you seen an in-depth, MSFM piece on something as basic as the US debt levels or their inevitable effects on inflation and markets? What do we get?


How about something as blatantly obvious as central bank balance-sheets as a percentage of GDP? Did you know that in Japan that number is 90%–rocketing up from 20% in 2008?

Did you know that at one magical time, before the dark ages of central bank control of what was once an honorable thing called natural price discovery and supply and demand, that the Bank of England’s balance sheet rarely exceeded 3% of GDP? Today, that percentage is 25%.

Did you know that once upon time, under disciplined Fed leadership like Bill Martin (as opposed to the Wall-Street subservient leadership of Greenspan, Bernanke and Yellen), the Fed’s balance sheet was contained at 4.5% of GDP, whereas today that figure is 26%?

In the EU, the ECB’s balance sheet is even a more bloated 40% of EU GDP.

These debt figures and artificial bank-supported markets are like a cancer cell in the brain of our markets. When they eventually correct—the “experts” will point to unknown “black swans” or “volatility events.”

In fact, the answer lies in the central banks themselves, not the “unknowns” of the very market bubbles they alone created.

But if you’re waiting for the Fed, BLS, Dept of Commerce or the “bubblevision” experts at CNBC et al to warn you in advance, history confirms that would be a poor choice of warning indicators. In fact, the Fed has the worst forecasting record of any institution I’ve considered—even CNBC…

Instead, you have old grumps like us at Signals Matter sifting through the noise…

Are We Just Being Bears?

Do posts with this level of candor mean we are just hoping for a crash and trying to get into the prediction business?

Not at all.

Even the brightest (or at least most famous) market bears, from Nassim Taleb to Marc Faber (and today, one could add Druckenmiller, Soros, Rogers, Klarman and others to the list), can show concern for years before markets actually correct.

The point made here is not that we are predicting that a “crash” is imminent–although our subscriber-only Recession Watch tool is constantly on guard for one. The point here is simply this: the data you and we are getting from the Main Stream Financial Media is bullishly lopsided. Market risks and reality are not being reported to the public as transparently as they should or could be.

We are here, in part, to bring balance rather than gloom and doom to the market data, to put markets in perspective so that you can make decisions within a more candid rather the one-sided context.

As I learned as Boy Scout: “Be Prepared.”

Thereafter, and depending on your own experience, risk tolerance, trading signals, personal views and approaches to risk management, you can make better decisions—whether long, short or cash/defensive.

In sum, we’re not shouting “run for the hills!” (Though our Subscribers will know as soon as we see the market bear emerge from his cave). We’re simply trying to present facts rather than spin so that you can invest within an actual “pro and con” perspective rather than just “puff piece” happy thoughts.

Basically, I suppose our frustration and calling at Signals Matter just comes down to this: Investors need and deserve straight talk and data from folks who studied markets, history, trading and economics, not journalism, marketing or public speaking.

What’s your take on the Main Stream Financial Media?

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