I might add that there are three types of unreliable witnesses, a liar, a damned liar, and an expert. Statistics are the tools of the expert and they are in full form today. The street is all about spinning statistics. There is big money in spinning the numbers as you can see by the bonuses that are being paid to Wall Street this last year.
They have been spinning the numbers for the economy for the past 3 years. Real estate peaked in July 2005 and the experts have touted the bottom in every year since the top.
In 2005, Bernanke made these comments:
"While speculative behavior appears to be surfacing in some local markets, strong economic fundamentals are contributing importantly to the housing boom," ...
Those fundamentals, Bernanke said, include low mortgage rates, rising employment and incomes, a growing population and a limited supply of homes or land in some areas.
"For example, states exhibiting higher rates of job growth also tend to have experienced greater appreciation in house prices,"
"The economy is strong. Jobs have been strong, incomes have been strong, mortgage rates have been very low," the chairman of the White House Council of Economic Advisers said.
The pace of housing prices may slow at some point, Bernanke said, but they are unlikely to drop on a national basis.
"We've never had a decline in housing prices on a nationwide basis," he said, "What I think is more likely is that house prices will slow, maybe stabilize ... I don't think it's going to drive the economy too far from its full-employment path, though."
And we can't forget Bernanke's "contained" to subprime comments in March 2007?
Although the turmoil in the subprime mortgage market has created severe financial problems for many individuals and families, the implications of these developments for the housing market as a whole are less clear. The ongoing tightening of lending standards, although an appropriate market response, will reduce somewhat the effective demand for housing, and foreclosed properties will add to the inventories of unsold homes. At this juncture, however, the impact on the broader economy and financial markets of the problems in the subprime market seems likely to be contained
Bernanke, the top expert, told us that real estate would not hurt the banks and the economy in early 2007. In August of 2007 at the Feds annual conference " Mr. Bernanke, speaking at the Fed's annual conference in Jackson Hole, Wyo., said the central bank will "act as needed" to prevent the credit crisis from hurting the national economy." You remember Aug of 2007 in the market right. Well if you don't here is a chart of the market.
The bottom of the V at the top of the chart is the Fed conference meeting. The market rallied to a new high in October 2007 on those comments (the right side of the V). I think we can say that those comments proved to be misleading. They continued to deny a problem with the economy right up until the crash in September 2008.
Bernanke is the "man of the Year" and it takes the head of experts to make up an economic growth story based on lower interest rates that are only available to the banks. The street is paid and the bonuses are huge to spin those numbers and make the head guy right.
What did Bernanke say in July of 2009:
Bernanke has predicted the recession will end this year, with many economists forecasting that the economy will start to grow again as soon as the current July-September quarter.
Bernanke's comment that unemployment could remain high for some time appeared to be more pessimistic than any of his recent public statements.. Strong jobs growth was a big reason for his optimisim for real estate and the economy going into 2007. Jobs growth is not present in the current recovery. Give them time and they will spin up some numbers for us.
The GDP was up 5.7% today and that the experts on the street are out in all their glory. Just as Bernanke said we have a jobless recovery. They say it was the fastest rate in 6 years. The problem is that the people that are making up the numbers are in a room with no windows and have not looked outside lately. The stock market has rallies and Bernake is right. Take a look at the stock prices if you don't believe him. Just like the rally into October of 2007 after his comments for the August 2007 Fed annual meeting.
Everything is relative. Bank of America traded to 3 on the last low and is now 15 that is a whopping 500% return unless you know that it came from 55 then that would to a decline of 73%. Well 500% is bigger than 73% but the stock is still much lower. The point is that at 3 it was at a very low level. In the larger scheme of things it is only bouncing off of the lows.
A person who was making 100,000 a year as a mortgage banker was fired and got a job as janitor making 25000 a year just got a 5% raise to 26250. This is progress?
The unemployment numbers will get better too because at some point the benefits run out and those people will not file. That means that fewer people filed for unemployment and that will be reported as a good thing just as the GDP numbers are being reported today.
The bulk of the increase for the GDP was inventory building and not in final sales which remains weak. I think final sales will rollover in this quarter but they will refocus in some other area to tell us that everything is OK.
It's all how you look at it and it is easier to make a low number look good than something normal. They can talk percentages and that is what they do now but like I said it is the easiest way to lie and there is big money in lies..errrrr statistics on Wall Street.
Mikey
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