WhisperNumber.com

Economic Confusion...or Lies

2005-12-05T21:18:00.000-05:00

Just this past Saturday, the AP reported a story with the headline "Greenspan: U.S. Deficit May Hurt Economy". The article states that 'Outgoing Federal Reserve Chairman Alan Greenspan warned Friday that America's exploding budget deficit and a protectionist backlash against soaring trade deficits could disrupt the global economy.'

He went on to say that 'If something isn't done to trim benefit costs, the resulting budget deficits would "cast an ever-larger shadow" over the future living standards of Americans'.

This is pretty severe rhetoric and one would think should be taken seriously.

But today Reuters reports that 'Treasury Secretary John Snow said that a steadily expanding U.S. economy has reached a point where it should start generating good news about incomes and jobs.'

Confusing to say the least.

Psychopaths Best Traders...

2005-09-19T11:10:00.000-04:00

Just thought this was interesting (perhaps offensive to some, but still interesting).

Psychopaths could be best financial traders-research

LONDON (Reuters) - "Wanted: psychopaths to make a killing in the markets".

Such an advert will not be appearing in the world's newspapers any time soon, but it may have a ring of truth after research revealed the best wheeler-dealers could well be "functional psychopaths".

A team of U.S. scientists has found the emotionally impaired are more willing to gamble for high stakes and that people with brain damage may make good financial decisions, the Times newspaper reported on Monday.

In a study of investors' behaviour 41 people with normal IQs were asked to play a simple investment game. Fifteen of the group had suffered lesions on the areas of the brain that affect emotions.

The result was those with brain damage outperformed those without.

The scientists found emotions led some of the group to avoid risks even when the potential benefits far outweighed the losses, a phenomenon known as myopic loss aversion.

One of the researchers, Antione Bechara, an associate professor of neurology at the University of Iowa, said the best stock market investors might plausibly be called "functional psychopaths."

Fellow author, Baba Shiv of Stanford Graduate School of Business said many company chiefs and top lawyers may also show they share the same trait.

"Emotions serve an adaptive role in speeding up the decision-making process," said Shiv.

"However, there are circumstances in which a naturally occurring emotional response must be inhibited, so that a deliberate and potentially wiser decision can be made."

The study, published in June in the journal Psychological Science, was conducted by a team of researchers from Stanford University, Carnegie Mellon University, and the University of Iowa.

Same as Last Post, Just Different...

2005-08-24T14:45:00.000-04:00

I just wrote about cause and effect, and the lack there of on most days. But today is another great example. The market is volatile. Trading is volatile. And calling the market moves are impossible.

Here are some headlines from the past hour:

'Stocks up on homes data, oil limits gains', 'Stocks Climb on Bullish Oil Inventory Data', and 'Stocks Move Higher As Oil Prices Drop',

The problem is the Dow is down 22 points (0.22%). No 'up', no 'climb', no 'limit on gains', no 'move higher'. The media knows the markets can move quickly, but insist on providing 'something', anything to justify their space.

So what happened between the time those headlines were written, and the market moved into negative territory and down 22 points? Homes data change? Oil inventory news not bullish anymore? Oil prices stop dropping and start moving higher?

A headline from 7:15am this morning read 'Stocks Mixed As Investors Weigh Data'. I like that. It tells me nothing and yet at the same time it tells me everything.

By the time you read this, the markets will have moved one way or another, so here's my headline for today:

'Stocks Move Up or Down Whether or Not Someone is Writing About It.'

Take Your Pick...

2005-08-16T11:43:00.000-04:00

Today's headlines - wonderful cause and effect without cause or effect.

"Stocks fall on worrisome earnings"

"Inflation Worries Send Stocks Down"

"Disappointing U.S. economic news drives stock markets lower"

I really like the first headline though because it was preceded by these two:
"J.C. Penney earnings rise" and "Wal-Mart profit up"

Surprised that the oil markets haven't made the headlines today to blame the falling stock market - oh, oil is only up 18 cents today, guess the media needed to find other reasons for the negative moves...

Update, 1:43 EST (two hours after this main post):
I should have known better as the following headlines are hitting now:
"Stocks fall as oil hurts retailers", and "Stocks retreat as Wal Mart report raises fears that high fuel prices choking spending". (Just fyi - crude is now down 2 cents.) The media just can't help themselves...

More fun.....uhh, I mean fraud...

2005-08-16T11:37:00.000-04:00

8/15, Reuters:
"Four former Wall Street brokers have been indicted for a scheme allowing day traders to eavesdrop on internal communications and profit by trading ahead of large share orders and subsequent price movements, U.S. prosecutors said on Monday.

The four brokers -- Ralph Casbarro, who worked at Citigroup Global Markets; David Ghysels, formerly at Lehman Brothers; Kenneth Mahaffy, previously at Merrill Lynch and Citigroup; and Timothy O'Connell, formerly at Merrill Lynch -- provided day traders at A.B. Watley Inc. and Millennium Brokerage LLC with material, non-public information, according to the indictment.

Day trader John Amore, of A.B. Watley, was accused by the SEC of paying the brokers to gain live audio access to the Wall Street firms' so-called internal "squawk boxes" that broadcast institutional orders to buy or sell large blocks of securities."

Citigroup, Lehman, and Merrill - all working for small guy....gotta love it.

And what is Citigroups response?
"We are vigilant about respecting client confidentiality," said Kim Atwater, a spokeswoman for Citigroup's (NYSE:C - news) Smith Barney unit. "The inappropriate sharing of proprietary information is prohibited, and we are committed to ensuring that anyone who violates our policies is held accountable."

Keep up the great work Kim, I'm sure we won't see your firm involved in another scandal next week...

This Insider Trading Gem Reported Today...

2005-08-08T19:43:00.000-04:00

(Associated Press): "The chairman of the Senate Finance Committee called Monday for a federal investigation into whether doctors are supplying investment firms with information about clinical drug trials before companies announce the results.

The Seattle Times reported Sunday that, despite confidentiality agreements, doctors are divulging details about ongoing research for a fee. The newspaper's investigation cited 26 cases in which doctors leaked confidential details of their research, including 24 in which firms issued reports to select clients that advised whether to buy or sell a drug stock."

Can't wait to see which one (or two) of the big boys was involved in this one...of course it will be a big surprise to see no admission of guilt or wrong doing.

Full story here.

Another 1,300 S&P Outlook...

2005-08-08T09:20:00.000-04:00

Paul McManus of Independence Investment was interviewed on Bloomberg this morning and is calling for the S&P (now at 1,226) to end the year at '1,333' (an 8% gain) due to strong economic conditions (employment good, interest rates low, higher corporate profits).

The July 11th entry also highlighted another great predictor of the S&P.

We'll see.

It's Just the Way Things Are...

2005-08-02T10:29:00.000-04:00

"NASD Orders Morgan Stanley To Pay Over $6.1 Million For Fee-Based Account Violations"

"NASD announced today that it has fined Morgan Stanley DW, Inc. $1.5 million and has ordered the firm to pay more than $4.6 million in restitution for failing to adequately supervise its fee-based brokerage business. More than 3,500 Morgan Stanley customers will be receiving restitution."

The full story can be found here.

I know that about every one or two weeks a story like this comes out, and that we have all become callous to this type of news and behavior, but it still requires more attention than it gets from the mainstream.

A few years ago (during 'the bubble'), investors were lied to, misled, swindled, and taken advantage of. Many so-called changes were implemented. But has anything really changed? The answer is yes and no:

Yes - many brokers have found new ways to take advantage of investors and take their money. And no - many brokers have not changed.

And the Truth is Simple....

2005-07-31T11:00:00.000-04:00

I found an article that all investors should read. It is something you won't see on the mainstream financial news shows, nor will it ever gain traction in the media outlets. It's a shame that it has been relegated to the weekend AP news releases.

The article is 'Study Shines Light on Earnings Statements' by Ellen Simon of the Associated Press. Aside from the one erroneous statement in the first paragraph that "if a company's earnings meet analyst estimates, the stock gets boosted. If it doesn't, it's busted" (which simply is not true), the article presents some very interesting information on funny accounting.

Here are a few selected paragraphs:
"A study by independent research firm RateFinancials, based in New York, concluded that nearly 33 percent of Standard & Poor's 500 companies file financial statements that don't accurately reflect their financial condition. Victor Germack, RateFinancials president, wrote about the study under the headline, "How Good are Those Earnings ... Really?"

A series of $1 billion-plus restatements, including HealthSouth Corp., Computer Associates International Inc. and the nation's largest insurer, American International Group Inc., have driven that question home."

The full article can be found here.

I See the Headline First...

2005-07-29T11:53:00.000-04:00

I really don't mean to single out AP Business writer Michael Liedtke, but the headlines he writes just seem to grab my attention. And I know that's part of his job (writing attention grabbers) but when they contradict reality, it just doesn't seem right.

His most recent headline is 'Chevron, Unocal Earnings Top Expectations' (7/29). The real reason it grabbed my attention was because right next to it was a headline from Reuters titled 'Chevron profit dips on refining results'. So I have two completely opposite words to go on - 'Top' and 'Dips'.

Mr. Liedtke's headline (at least to me) implies something 'good' or 'positive', while the Reuters headline implies something 'less than good' or 'negative'. I think that's a fairly reasonable interpretation of the two headlines.

But when I read the first paragraph Liedtke's article, he reports 'Chevron Corp.'s second-quarter profit fell 11 percent, but topped analyst expectations, a positive surprise that still wasn't enough to improve the company's bidding position in the takeover battle for Unocal Corp. '

I am confused again - it's a seemingly positive headline, that reports negative profit news, but at least the news topped analysts estimates (another positive), but that wasn't really positive. (That's some spin.)

The Reuters first paragraph, however, contained the following statement: "No. 2 U.S. oil company Chevron Corp. posted a 10 percent decline in quarterly profit on Friday as a hit from refinery outages and an absence of one-time gains outweighed a boost from soaring oil and gas prices...Net income was $3.7 billion, or $1.76 a share, in the second quarter, down from $4.1 billion, or $1.94 a share, a year earlier. Analysts on average had expected Chevron...to earn $1.65 a share, according to Reuters Estimates."

Reuters has all the reasons in the world to make their own analysts from Reuters research look better than they actually are, and it could almost be expected that they would put the spin on the report and data, but they didn't.

So why does Liedtke feel such a need to do this? I think it may be time for so-called journalists to disclose their financial positions when writing market related articles as this really appears to be a biased point of view.

* Update about an hour or two after original post:
So much for Reuters maintaining some integrity/reality. Reuters 'journalist' Deepa Babington has followed up with matching headlines of 'Chevron, Unocal profit beat forecasts '. Oh well, they had it right for a few minutes at least...

Headlines of Hype...

2005-07-20T09:47:00.000-04:00

'Yahoo Inc. Second-Quarter Profit Soars', (AP Business Writer Michael Liedtke )

"Wall Street reacted to a second-quarter earnings report that didn't measure up to analysts' lofty expectations ."

Aside from the contradiction between the attention grabbing positive headline, and the negative statements in the article, let's take a look at the real data: the analysts so-called 'lofty expectations' were 13 cents. And what number did Yahoo report that didn't live up to that number? Uhhh...13 cents. Anyone else confused yet??

So Yahoo lives up to the lofty 13 cents number by reporting 13 cents, but in some sort of 'world of mainstream financial journalism' they didn't meet the number....and Yahoo stock is falling hard today.

Here's a more plausible case for the fall in stock price today: the whisper number derived from an average of individual investors' expectations regarding YHOO's earnings for the most recent quarter from WhisperNumber.com was 15 cents. Yahoo failed to beat this (true) lofty expectation and the stock is reacting accordingly.

Earnings Season 'analysts'...

2005-07-14T11:02:00.000-04:00

We've just started another corporate earnings season. And, as usual, the analysts estimates are more wrong than right. They continue to be cited as the primary source of information, and companies continue to issue 'warnings' if their expected earnings will not meet or beat the analysts estimates.

So right from the start, the companies have to provide guidance to erroneous (read wrong) data from analysts - the same analysts that have proven themselves worthless for every earnings season one can remember.

Now, let's take it one step further. Let's say a company reports earnings that are well ahead of these analysts estimates. A great (current) example is Apple Computer (AAPL). Apple reported "its best quarterly profit ever". (Kudos to Apple.) Apple reported earnings of 37 cents a share. Analysts were expecting 31 cents.

Aside from the obvious fact that the analysts greatly underestimated the earnings, the mainstream media then has these same 'professionals' on as guests, and ask them why Apple did so well, and what their thoughts are for the future of the company.

Did I hear that right? Why did they do well and what do you expect from them? THESE GUYS JUST PROVED THEY HAVE NO CLUE LET ALONE ANY IDEA OF WHY THEY DID WELL OR WHAT TO EXPECT. So why are you asking them these questions? Why are they even on as guests?? What purpose do they serve other than filling air time?

Here is a simple thought.

Stop it.

*Here are two articles worth a read with further insight to the subject:
Analysts Analysis - An Oxymoron
Innacurate and Providing No Direction

Hey, Look At Me....

2005-07-11T09:41:00.000-04:00

Here are a few to look back on at the end of the year: Kevin Caron of Ryan Beck & Co gained attention today by calling for the S&P to hit 1,300 by year end, and Ed Keon, Chief Investment Strategist at Prudential recommends investors put 100% of their money into stocks. Keon also sees the S&P 500 climbing 30% in the next 18 months based on 'stocks being cheaper relative to bonds than they have been at any time since 1980'.

So for the first six months of this year, the S&P is up one quarter of one percent only turning positive a few times over the past few months. But going forward we're going to see an 85 point gain?? Why not go all out and expect 1,400 or even 1,500? I guess that would just be absurd.

Apparently Economists are always right...

2005-07-08T15:28:00.000-04:00

As a follow up to the earlier note in regard to main street being ignored, and having watched (and read) the financial news over the past few hours, it has come to my attention that economists are never wrong.

You see, I learned today that the non-farm payrolls number the economists expected (which was 195,000 or more) actually was based on the May number being revised and then taking the average of the payroll numbers for the past three months (not two months, not four months, but three months). (Of course we didn't know that nor were we told that until after the fact - after all, we're just common folk with no need to understand that complicated economic stuff.)

So although the payrolls number came in at 146,000, the average of the past three months (after last month was revised higher) is approx. 175,000 (although a number of economists on Bloomberg today rounded up to a much nicer 180,000). That's very close to the 195,000 estimate, and more important closer to the number needed to sustain a 'growing' economic situation.

By the way, the average payroll number for the past two months is approx. 125,000, and the average over the past four months is 160,000. That's why you need to take a three month average (c'mon, everyone knows its about three month averages these days), and that's why economists are never wrong.

Next months number should be even more interesting. If they're higher than estimated, economists will be right (because positive news is never wrong) and you won't hear about any 'three month average'. But if estimates are lower, look for that 'floating' average to run out to five or six months to save face. And don't expect the media to question it.

(And on a follow up to the side note on Alcoa earnings, if you take the last three quarters of earnings, and average them you get a number awfully close to the analysts estimate. Hmmmm.)

Main Street ignored again....

2005-07-08T12:00:00.000-04:00

While Wall Street was proudly expecting the Nonfarm payroll numbers to come in somewhere between 195,000 and 198,000, individual investors polled by WhisperNumber.com were expecting a much lower 146,800 (146,814 to be exact).

I sent notice of this figure out to the media on Tuesday of this week, but received no mention. And today Bloomberg announces that the actual number reported of 146,000 was "pretty much in-line with expectations".

If the number had come in at 50k greater than the Wall Street expectations you would never had heard the phrase 'in-line'. You would have heard great economic stories, and you would have seen many 'analysts' as guests on the mainstream outlets that 'expected' a number this high.

But the media never wants to cast a shadow on any negative news, and god forbid they ever hold those that had the 195k outlook accountable. It's a shame that the masses of individual investors continue to be ignored.

(And on a side note, Alcoa reported today. Analysts expected 45 cents, while investors at WhisperNumber.com expected 54 cents for the quarter. Alcoa reported 52 cents...)

Journalistic integrity...

2005-07-08T11:13:00.000-04:00

Reuters.com - No Spin. No Agenda. Just the Facts. As they happen.

I just found that on the Reuter's news site. Funny thing about reporting financial news is that sometimes you need to source a wide range of 'analytical' data. But Reuters only reports earnings consensus estimates and analysts expectations from their own Reuters Research group. You'll never see Thomson or Zacks data mentioned in a Reuters news story...and why? It's simple - no spin, no agenda, just the facts as they make them.

It Must Be Right Then...

2005-07-07T13:05:00.000-04:00

Bloomberg is all about quoting Abby Joseph Cohen today. Her wisdom for todays market (along with other 'strategists' Tobias Lefkovich of Citigroup and Ed Keon of Prudential) is to view the drop as temporary. Andrew Burkly of Brown Brothers Harriman piped in and said today should be 'viewed as a buying opportunity' (that was reported at 1:03EST, Dow at 10,248.)

Is anyone else thinking 'no kidding'? Not much of a call here in terms of this being temporary. As for the 'buying opportunity', sentiment data tells us otherwise.

For more background on these great 'strategists' of our day click on the following link:
http://www.whispernumber.com/wake_up3_scandal.jsp

I also found this link from 2002 which presents a great timeline and more specifics of these great 'strategists' that the media continues to promote:
http://www.makethemaccountable.com/LeadingLambs.htm

In the Beginning....

2005-07-06T17:50:00.000-04:00

As the owner and founder of WhisperNumber.com (started in 1997), I've watched over the years as the mainstream media has ignored a great number of stories that would be of interest to investors. These stories are primarily focused on the 'wrong doings' of the big financial firms that support the mainstream media outlets thru advertising.

I have written (or helped write) articles called 'The Firms and People that Steal Your Money', along with 'Front Running and Pre-Released Data at the University of Michigan', and 'Hypocrisy and Conflict of Interest Within the Financial Media'.

I've also watched as the media reports on unusual 'cause and effect' stories in both the stocks and commodities markets. Basically if there is no true cause for a market move, the media will quickly come up with one to try and validate their 'being'.

I hope that this blog will be an ongoing look at the stories that are quickly glanced over by the likes of CNBC, Bloomberg, Reuters and the Associated Press, and will also look for answers to those 'cause and effect' stories. I look forward to your comments in regard to these posts.

John Scherr, Founder
WhisperNumber.com