Those of you who over the many years have followed some of the thoughts and observations I jot down each morning may have noticed several themes. Prominent among them is that forecasting is folly; cognitive errors create investing mistakes; consider context when analyzing data; recency bias overemphasizes the latest data; mixing politics with investing is a costly mistake.
Which brings us to an article in the National Review that managed to combine many if not all of these themes: “2014’s Jobs Boom Wasn’t Even Much of a Boom. Does This Jobs Report Mean It’s Already Over?“
As I noted back in 2011, “When you are in the polling booth, vote however you like; but when you are reviewing your investing options, it is best to do so with a cold, dispassionate eye.”
The same is true for analyzing economic data. Those of you who zestfully pursue politics will dislike this analysis, for it points out the many errors of your ways. You are not my intended audience; rather, the people who are actual investors will find this useful (and perhaps it will save them some money).
Let’s have a look review some of these analytical errors.
Continues here: Political Bias Corrupts Economic Analysis
When I first studied politics and economics (1970) it was within a university school of political economy. That made sense as “the term political economy is derived from the Greek polis, meaning ‘city’ or ‘state,’ and oikonomos, meaning ‘one who manages a household or estate.’” The Encyclopedia Brittannica goes on to note that this is a very old intellectual inquiry – Plato, Aristotle, etc. – if a young academic one.
Despite the protests of economics departments, political parties and media, politics and economics are intertwined. Politics is about the distribution and negotiation of power, and as power can be controlled (at least in part) by perception, it is no surprise those that seek influence start there.
All of which is to say that any time an investor reads or hears economics s/he should image politics very nearby regardless of the source.
Headlines are the most dangerous thing there is when its comes to reading anything in the press. The pressure on the media companies to have “eyeballs” on their material is overwhelming. It leads to the headline you gave as example which clearly isn’t what the author would have proposed.
One of the great things about your blog is you make everyone open up your video suggestions. Opening up Bloomberg or most newspapers on line is to be bombard on every page w/ sight and sound distracting you from why you came.