Readers may recall that I have come to regard Mish as something of a contrary indicator. By the time he trots out a doomish statistic, it is probably very close to its turning point. In the last twelve months railroad traffic, home-price adjusted CPI, and finally state tax receipts all fit this pattern.
Yesterday, dismissing the census bureau's report about retail sales, his entire argument rested -- without citation to supporting data -- on state sales tax collections. Here's what he said:
Month in and month out we hear the same nonsense about retail sales. I will believe it when I see state sales tax collections support the claims.(my emphasis)
....
Reis has it correct and so do I. Not only is it easy to beat record low comparisons of a year ago, same store sales are rising in part because stores are closing like mad.
....
More importantly, states have been reporting declining sales tax collections for the entire year.
Admittedly state tax collection numbers are frequently delayed by a couple months, but that still does not jibe with overly bullish comments about sales over the first five months of the year from the International Council of Shopping Centers.
Well, it's time for Mish to believe. Had he spent 20 minutes checking the data instead of blithely assuming he was right, here's what he would have found about year over year state sales tax collections in May (note the below states are the same ones he relied on in an extensive post last February):
New York State: up 7.8%
Indiana up 5.5%
Texas up 1.5%
Tennessee up 3.7%
Alabama up 2.1%
Georgia up 9.0%
California up 13%
Florida up 6.0%
Pennsylvania up 7.5%
Ohio up 5.5%
Of all the states he reported on in February, only New Jersey reported a decrease in YoY sales tax revenues, down -3.3%.
Ohio up 5.5%
Of all the states he reported on in February, only New Jersey reported a decrease in YoY sales tax revenues, down -3.3%.
With one exception, the others weren't just up, but up well in excess of the inflation rate. In short, they supported the bullish Census Bureau report. Mish's own yardstick cuts the legs out from under his argument.
In a way, it's sad. When we wants to, he can do some prodigious analysis. But he has been so blinded by his Austrian/libertarian/goldbug ideology, that instead of fitting his conclusions to the data, he tries to fit the data into his preconceived conclusions.
For example, about three years ago he wrote a number of posts about a money supply measure he called "M prime." He fit those into a version of Kasriel's recession indicator, and got an extremely tight fit with no false positives or negatives. With the hubbub about "double-dip" now, it would be very interesting to see what an "M prime" model showed. But Mish won't do it, because ideologically he has refused to believe the improving data that has been accumulating now for an entire year. Thus, deductively, if there's been no recovery, why examine data that would shed light on a possible double-dip?
In the meantime, the Emperor of Doom is wearing no clothes.
6 comments:
I do remember ;)
But while Mish might be wrong at this point and has difficulty using and understanding economic data, the point you made back then still holds : there are leading indicators, coincident indicators and lagging indicators. Mish made 2 mistakes in his last note : the stupid mistake is that he didn't even check the data, the sophisticated one is that he used a seriously lagging indicator.
And that's really sad because he is a very active blogger, he is often point on and he sometimes finds out outstanding info.
For the interested ones, here's Mish's post on Kasriel :
http://globaleconomicanalysis.blogspot.com/2007/03/foolproof-recession-indicators.html
We quickly found out that his overly complex "Real M Prime (CPI adjusted)" indicator is quite redundant if you also calculate the 10yr-3months and the 10yr-2yr spreads. But NDD will love it because it looks bullish.
I can not openly disagree with him more than I have already, but I will still point out something. Our usual indicators are great for profit recessions, which are our usual recessions. Just check out the YoY growth of corporate profits and it is usually an excellent leading indicator. It went negative in 2007 (if I remember correctly) and positive near mid 2009.
But our economy might experience something called a balance sheet recession and it's more of a mess and anything like the neat recoveries/recessions we had in the past 50 years. Just look at Japan, going nowhere for 20 years stock-market wise.
In my opinion, we will have at least a failed recovery and we won't have a 64% employment rate before a very long time.
Oh my, Mish just posted the same message, quoting himself. I left him a comment :
http://globaleconomicanalysis.blogspot.com/2010/07/following-yesterdays-hype-of-fastest.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed:+MishsGlobalEconomicTrendAnalysis+(Mish's+Global+Economic+Trend+Analysis)
He is very clever and he will surely update his analysis, reaching the same conclusion but with different and non-fantasy based arguments. His reaction should be very interesting.
CL:
"We quickly found out that his overly complex "Real M Prime (CPI adjusted)" indicator is quite redundant if you also calculate the 10yr-3months and the 10yr-2yr spreads. But NDD will love it because it looks bullish"
Heh. Just to be clear, I don't mind disagreement at all. I try to let the data tell me whether to be optimistic or pessimistic, rather than the other way around.
When I saw things getting worse (I was only the second person to use the term "The Panic of 2008" when I saw it coming in late 2007), people loved me. When I turned optimistic in Spring of 2009, they hated me. As I grow more cautious, I suppose I will be treated more warmly.
But I try to leave it up to the data, not my ideology.
BTW, good luck on having Mish publish your comment. I assume it will go down a black hole, but if he does publish it, please let us know!
"BTW, good luck on having Mish publish your comment. I assume it will go down a black hole, but if he does publish it, please let us know!"
---> "Message awaits moderator approval"
And it is the 3rd message chronologically... meanwhile 22 others were cleared.
I do understand your inclination to consider data instead of ideology but I can not understand why you now put a higher emphasis on coincident/lagging data than on leading indicators. Did I miss something ?
CL:
Since I focus a lot on jobs (which are coincident), the fact that the Leading Indicators are rolling over doesn't mean that jobs will roll over immediately. They, and income, will probably continue to do well for a few months.
Also, if you haven't picked up on it yet, I've gone from being more optimistic than Bonddad to less optimistic -- I see a 50/50 chance for at least one negative quarter of GDP between now and the end of the year. The difference is primarily (I think) in how we view housing. But I suspect it will be brief and shallow. I plan on fleshing that scenario out as soon as I have a little more time.
He just replied and his point seems to make sense. I'm not convinced though, he is trying too hard. First he said that sales tax collection were down YoY, now he is trying to create a completely different argument that doesn't hold up.
For example, he says that NY sales tax are up 6.2% BUT the tax rate increased to 8.85 from 8.5%. That is a 4% increase. Given that we end up with a higher increase, it means the economy grew in the past year.
But hey, why should he let numbers get into the way of a nice argument and a nice round of applause from his bearish readers ?
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