has broken down over the years, and scaremongers have been able to fit any change in the supply of dollars into whatever narrative suits them. Weak money growth is a problem, they argue, because having fewer dollars moving around the economy could signal that the system is seizing up. On the other hand, a rapid growth of the money supply has been used by doomsayers as a sign that the only thing supporting the economy is the.
The third type of much-loved, often-dubious tool is the overly fickle indicator. These data points are prone to large swings that produce a lot of false signals but make it easy for analysts to spin up a warning of impending catastrophe. , which has a near-mythical reputation on Wall Street. The ISM is convenient to use: It is released early in the monthly data cycle, broadly tracks the swings of the economy, and is easy to understand.
Let's assume the ISM signals a turning point in the business cycle when it runs below 50 for three consecutive months. Even with that broad reading, the ISM tends to send more false signals than correct ones. For example, in the 1990s the ISM had several dips below 50 that lasted longer than three months and no recession popped up. In fact, the ISM is three times as likely to be late in signaling a trough as it is early in signaling a peak. A recession prediction indicator this is not.
One of the most basic tenets of statistics is that correlation is not causation. Most things in the macroeconomy are correlated. When people are getting more jobs, it usually means businesses are selling more products. Just because two lines on a chart are moving in a similar direction doesn't mean they explain everything happening in the wide world.
I cannot tell you the number of analysts I have come across in this industry who believe they have stumbled on something groundbreaking by publishing a chart of industrial production — a measure of how active factories are — against the ISM — which is, again, a measure of how factory executives feel about the economy. In many cases, the folks who break everything down into one or two"simple" explanations tend to have a conclusion in mind first.
volatilitysmile That's probably true. Joe Granville maybe was the worst & is long gone, RIP, but there are many more 'Joe Granville's' today than there used to be . . .
Sound like the media also.
If you can convince people the market is going to crash, the market is going to crash.
Thank you for saying this It could be said for journalism in general; political, financial, social, education, …, every aspect Folk chase the dollar their media business is after and not the integrity of their chosen field