Statistics That Soothe The Soul

Good day. Well, the dollar is swinging the hammer again. Big Ben is telling everyone that the economy is strong, thus indicating that rate hikes will remain in the dollar’s future. I’ve got a great story that appeared in my good friend David Galland’s newsletter, What We Now Know, regarding statistics. I’ll share that with you in a bit.

As I said, the dollar is swinging the hammer again and therefore, every currency takes it on the chin. There’s not a currency amongst us that saw the light of day, yesterday. But again, that’s just short-term noise.

Yesterday, I forgot to mention that leading indicators for February posted a -0.3% showing. I wouldn’t call that an indication that the economy is strong – would you? Apparently, Big Ben Bernanke does! PPI fell 1.4% in February – yeah, right. PPI for the year rose 3.7% – yeah, right! However, if this is the data the Fed is going to use, why would future rate hikes be needed. The previous 12 hikes look as thought they are beginning to make a showing in the economy!

OK. Since I told you up front about David Galland’s What We Now Know newsletter, I’ll get to the story that appeared in yesterday’s edition. It’s called Shadow Statistics.

“You’re bombarded with all those statistics that pour out of Washington, the ones that appear to show how unemployment and inflation are low, GDP is expanding, and so on. They may not square with your personal experience, but after all, the government pays a lot of people with fancy degrees a lot of money to carefully track economic statistics. So you figure the numbers must be somewhat accurate.

“But now a man has come out of the woodwork who’s done the real math and properly crunched all the numbers. His conclusion: ‘If the numbers don’t seem real to the man in the street-they probably aren’t.’

“Our new friend is Walter J. (John) Williams, with a B.A. in Economics and an M.B.A., both from Dartmouth. He serves as an economic consultant, both to private individuals and Fortune 500 companies.

“Real unemployment right now – figured the way that the average person thinks of unemployment, meaning figured the way it was estimated back during the Great Depression – is running about 12%. Real CPI right now is running at about 8%. And the real GDP is probably in contraction. I venture that if you talked about those numbers now with the average person, they would say that they seem reasonable…my work shows that the economic perceptions of non-professionals actually have some real validity; there are in fact reasons for the disconnect between official statistics and what the populace is feeling.

“According to Williams, government realized as long ago as the Kennedy administration that Americans would rather hear good news even if it’s false, and so the manipulation of data began.” (sort of like statistics to soothe the soul!…Those are my words!)

If you want to read the entire article, you can subscribe to David’s newsletter by clicking here:

OK. I know that was a lot for early in the morning, but you hear me rant and rave about these pieces of data and how they feel to be manipulated, and now you know!

The Reserve Bank of India (RBI) has announced the establishment of a committee headed by the ex deputy governor of the RBI, Tarapore, to explore the possibility of full convertibility of the rupee. The committee will submit its report on July 31, 2006.

So, it’s not going to happen as quickly as we hoped when we first heard the news, eh? However, this is something to keep aware of, and without trying to get my hands slapped. I need to begin looking into adding rupees to our currency roster.

The hit on emerging markets’ currencies came back, yesterday. First, there was a report that Brazil’s finance minister is involved in a scam. Then, Danske Bank issued a report saying that Iceland is headed for a recession – things that neither currency of these emerging countries needed! I continue to wonder about Iceland, and the fact that everyone inside of Iceland says the data is misunderstood and they will be OK. At the same time, everyone on the outside keeps analyzing the data and calling for a rough landing for the economy. It’s hard to say which one is correct until the dust settles, but I guess you have to side with one call or the other.

Big Ben Bernanke was talking about the U.S. trade deficit last night, and made this preposterous statement: “The Trade Deficit needn’t cause a precipitous decline in the dollar’s value.” Like the article above said: “Americans would rather hear good news even if it’s false.”

The data cupboard is empty today. So, the words of Big Ben will remain in the minds of traders today, and that means the dollar will continue to hold the hammer.

Oh, and one more thing…did you see the huge rise in silver yesterday? The SEC has finally approved the Silver ETF, and the news pushed silver to $10.55 from $10.15 the previous day!

Currencies today: A$ .7175, kiwi .6215, C$ .8550, euro 1.2088, sterling 1.7480, Swiss .7680, ISK 71.75, rand 6.37, krone 6.5720, forint 220.73, zloty 3.24, koruna 23.7550, yen 117, baht 38.95, sing 1.6170, China 8.0280, dollar index 89.81, silver $10.55, and gold $550

That’s it for today. Our new Metals Select product is really beginning to gain traction. It is proving to be the perfect compliment to the MarketSafe Gold CD and our family of World Currency products. Three more days and I begin my spring vacation! YAHOO! I’m heading right back to Jupiter to watch my Cardinals again. This time, I’m leaving my laptop at home! Have a great Wednesday!

Chuck Butler
March 22, 2006

The Daily Reckoning