Posted by
grad_1986 on Thursday, June 18, 2009 12:47:49 PM
Lately we have been hearing a lot of "economic data" being released from Washington. Some of that data is OK and some of it is not (depending on your perspective). One piece of data brought it is the ever debatable, Consumer Price Index which measures inflation. I have written an article in the past on this meaningless measurement from our government and how it has been twisted and mangled over the years to where it measures absolutely nothing we care about. Yet we refer to it as some infallible yard-stick. We are being told today that if you remove FOOD and GAS from the equation, our inflation is practically ZERO. But who on God's green earth can live today without FOOD and GAS?
Now today more economic data is being spewed from DC to help try to spur on the markets. But what does this have to do with Bernie Madoff? Simple, Madoff played off of peoples desires to be financially secure. Madoff was able to provide his investors with complex reports showing earnings of 12% or more year after year even though the markets as a whole where not doing nearly that well (and lost money in some quarters). People were willing to turn a blind-eye to these discrepencies because inside they desired "security" over "reality". Now the government is doing the same to us as Madoff did to his investors, by giving us dishonest numbers that are not based in reality but a desire to make us feel better and more positive about our futures.
One thing I have learned over my years as an engineer is that numbers can be made to say whatever you want. You just need the right data and the right charts. Even more easily skewed are so-called "survey numbers". These numbers are extremely suspect as they are totally dependent on who and how you survey. What companies did you call? Ones that got stimulus money or ones that did not? What questions did you ask them?
If your gut is telling you things are not well and you see people being laidoff left and right, do the numbers jive? Probably not. Washington is playing the same game as Madoff did. Crossing their fingers and hoping things don't get too bad and people start bolting for the door. Madoff was able to keep his investors duped only as long as ONE thing did not occur and that is the markets did not fall too much. He knew that not even HE could pull a rabbit out of his hat and provide earnings high enough to keep his investors from leaving and emptying their accounts. That is when he knew the game was over and turned himself in to the authorities.
I think most Madoff customers today would tell us all one thing: TRUST YOUR INSTINCTS AND NOT THE NUMBERS!!