Posts filed under “Bad Math”

NFP, Inflation & Conspiracy Theories

 

 

 

 

Today’s column is about stupidity. Perhaps that’s overstating it; to be more precise, it is about the conspiracy-theorist combination of bias, innumeracy and laziness, with a pinch of arrogance thrown in for good measure.

I am talking about the manifold ways various economic reports get misinterpreted, sometimes in a willful and ignorant manner.

That’s right, I am calling some of you ignorant (not you, but the guy next to you). There are things we all should understand about how specific data series work in the real world.  However, I want to make a distinction between legitimate criticisms of the details of any economic report and wild-eyed accusations of falsification.

Let’s start with the employment report. Long-time readers know I am not a fan of the monthly data releases, preferring instead to focus on the trend. This report is an attempt to assess the changes in a labor pool of about 150 million workers in real time, and is highly subject to revision. Like all data series based on a model, it is often wrong but useful.

Over the years, I have criticized many aspects of the models that underlie economic news releases: Business birth and death adjustments can yield a serious misreading of the labor market’s health. The tendency to ignore the broader unemployment landscape in the U6 numbers in favor of the U3, or the official unemployment rate, also misses significant trend changes. I have also written about reconciling the household and establishment series. The new home sales data series is also very noisy and unreliable. And don’t get me started on the many issues with the various inflation-modeling issues, such as hedonics and substitution. However, the MIT billion prices project shows that while the Bureau of Labor Statistics inflation data are quite imprecise, they are consistent, and therefor helpful.

Back to the foolishness that pervades the world of the conspiracy theorists.

Let’s begin with perhaps the most infamous charge, made by former General Electric Chief Executive Officer Jack Welch, the month before the 2012 election . . .

 

Continues here

 

 

Category: Bad Math, Cognitive Foibles, Data Analysis, Economy, Really, really bad calls

About Those Black Friday Numbers . . .

Stories based on Black Friday consumer spending numbers are a holiday tradition. Bob talks with investor and Bloomberg View contributor Barry Ritholtz about the problems with stories based on those numbers.   NPR/WNYC: Source: On the Media

Category: Bad Math, Consumer Spending, Data Analysis, Really, really bad calls

Bad Maths

We live in an era of technological advancement. Whether it’s genomics, nanotechnology or software algorithms, the world is driven by mathematical solutions to complex problems. Yet at the same time, we are surrounded by what I like to call Bad Math. It seems as if the average person has little familiarity with the fundamental workings…Read More

Category: Bad Math, Really, really bad calls

Zombie Ideas? Blame the Billionaires…

  “We are in the business of making mistakes. The only difference between the winners and the losers is that the winners make small mistakes, while the losers make big mistakes.” -Ned Davis   I began my career in finance on a trading desk. You learn some things very early on in that sort of…Read More

Category: Bad Math, Philosophy, Politics, Really, really bad calls, Regulation

Wherein I Correct Nobel Laureate Daniel Kahneman’s Math

I am a fan of Morgan Housel, columnist at the Motley Fool. His writings evince a strong understanding of behavioral issues, and he has a gift of sifting through the nonsense to get to what really matters. Only on rare occasions do I get to disagree with him. Today is one of those times. Housel has…Read More

Category: Bad Math, Psychology

Got Math? Odds Are, You Don’t Understand Probabilities

Last week, we discussed the problems with having poor reading comprehension and the impact that has on consuming news. This week, I want to look at the lack of math skills. America seems to becoming a dangerously innumerate society. Innumeracy is incompetence with numbers rather than words. This is a worrisome issue for the future…Read More

Category: Apprenticed Investor, Bad Math, Data Analysis, Really, really bad calls

Why the American economy grows faster under Democrats

Another classic correlation versus causation issue:

Autoplay video after the jump

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Category: Bad Math, Video

Six Ways to Separate Lies From Statistics

From Betsey Stevenson & Justin Wolfers, a short primer on separating lies from statistics:   1. Focus on how robust a finding is, meaning that different ways of looking at the evidence point to the same conclusion. Do the same patterns repeat in many data sets, in different countries, industries or eras? 2. Results that…Read More

Category: Bad Math, Data Analysis, UnScience

Why Are So Many Traders Killing Themselves?

This column is not about working too hard, or the dangers of high cholesterol, or lack of exercise. It is about a rash of suicides within the financial community. What this actually means is less certain than the reporting on it might imply. Yesterday, 47-year-old Edmund Reilly, a trader at the Vertical Group, jumped in…Read More

Category: Bad Math

Get Lucky: 5 Years Ago Today

Five years ago today, I made the luckiest market call of my career. A few details and some context first, than an explanation as to why this was so lucky. In 2005, I knew something was amiss in the global markets. The various metrics we track showed that credit had become a full on bubble,…Read More

Category: Bad Math, Investing, Markets, UnGuru