HA, ha, ha, ha, ha, ha, ha, ha, ha!
People are amused at the fact that long ball hitters in baseball can make $30,000 for each homer they hit, or that a mediocre quarterback in the NFL will get paid $100,000 per game.
Well, how about the guys on Wall Street who get paid a bundle and never hit a home run, or throw a touchdown, or – for that matter – accurately predict an economic number!
Investors got killed last Friday if they bet on the employment forecasts being made by Wall Street’s economy watchers.
The experts had been predicting that only 175,000 new jobs would be created in April, but the number came in at 274,000 – not even counting the 100,000 extra jobs the government added to the previous two months.
Bonds tanked on the announcement of those 274,000 new jobs and interest rates went to the moon, which means that Wall Street’s bobble cost clients an end zone full of money.
Wall Street suddenly went from thinking that the economy was doomed and the Federal Reserve would have to stop raising interest rates to now believing that borrowing costs will have to be raised by half a percentage point next month.
Wall Street’s schizophrenia would be pretty funny if it also wasn’t so sad. So I’ll go through my drill one more time as to why Alan Greenspan is facing a self-described “conundrum” on interest rates and why Wall Street economists keep striking out.
As I said again in last Thursday’s column, the employment numbers that are reported each month have little to do with how the economy is really performing.
The numbers are adjusted in several different ways but the key one is a change made for the birth and death of companies that are beyond the ability of the Labor Department to survey.
This April’s employment gains were boosted by 257,000 jobs that the government thinks (but can’t prove) were created by new companies. And the next two job reports should also make very optimistic assumptions on new company jobs – although not as big as April’s.
In fact, the next shockingly bad number shouldn’t come until July’s jobs figures are released in early August. That’s when the government assumes more companies will be dying off than being created.
Even the New York Times’ editorial page on Sunday noticed the suspicious rise in jobs each Spring, only the paper doesn’t understand why this is occurring.
All I can say is that trying to figure out the economy over the next few months will be no laughing matter.
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Why did billionaire Kirk Kerkorian go the unusual route of making a tender offer for shares of GM stock?
The end result was that the tender created a short squeeze that propelled the auto maker’s shares a lot higher than they probably would have gone. But that wasn’t why he did it.
The real reason for the tender offer approach was much simpler: “People were calling (Kerkorian) up and asking about” rumors he was going after GM, says a source close to the situation. “The word was out” and Kerkorian wanted to end the funny trading.
Why GM?
The source says Kerkorian really does see it as an undervalued asset, with “massive revenue, lots of cash flow and lots of cash.”
Or, you can use my theory: Kerkorian recently sold MGM and is buying GM because he’s nostalgic.
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Congratulations to the Wall Street Journal for finally discovering the mysteries of hedonics, the highly questionable adjustment that the government makes to the consumer price index in order to keep inflation artificially low, growth bogusly high and money unfairly out of Social Security recipients’ pockets.
Journal editors led their front page yesterday with the hedonics article.
Readers of this column know it’s been one of my pet peeves for more than a decade.
Now I suggest that the Journal work a little on something called “geometric weighting” and also “intervention analysis,” two other statistical techniques Washington uses to deceive us on the true level of inflation.
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Hedge funds lost 1.75 percent of their average asset value in April because of the lousy stock market, according to Hennessee Hedge Fund index. The index is down 1.62 percent so far this year.
On the bright side: that was slightly better than the overall market with the Standard & Poor’s index down 1.90 percent in April and off 4.01 percent for the year to date.