How Financial Reporters Create Illusion to Cover Up Wall Street's Scams
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As Charles Dickens reminded us in his classic novel Great Expectations, the line between crime and cash is a continually blurry one. And it's easily manipulated by language and narrow self-interest.
For example, let's just consider the overly extensive use of one term: "Unexpectedly." It is especially ubiquitous in finance journalism, where it is repeatedly used to console a rightfully nervous readership that, while good news is a great expectation, bad news just seems to comes out of nowhere. Although I've been informally following this clumsy usage for years now since diving into the hazy, crazy world of finance, I've never run out of daily examples. Just plug the term "unexpectedly" into Google News on any given day, and neither will you.
Here's a few that Google coughed up during this writing: " U.S. Home Sales Fall Unexpectedly in Feb.,"ABC News reported. " French Consumer Confidence Unexpectedly Falls On Job Concern," Bloomberg News reported. " South Africa Unexpectedly Cuts Rates to 6.5%," the Wall Street Journal reported.
Unpacking any of these headlines should be simple enough for those who aren't economists, even without the benefit of reading the stories themselves. Nothing in the average American's life and salary, to say nothing of the lenders and companies he or she has to deal with, warrants the surveyed optimism of economists who think home sales should be going up, rather than down, in any given month.
Meanwhile, France isn't immune to our continuing global recession, which is being further enhanced by deepening unemployment and rising corporate profits. So it's no wonder the French don't feel like spending money, when they don't have jobs. And although you need to be somewhat savvy on international currencies and markets to suss out the meaning of South Africa's rate cut, it's not a stretch to look at the headline and guess, correctly, that the nation is trying to encourage demand for its stocks and bonds. In other words, none of these things are unexpected. They make sense and cents.
Except to economists and the traders they enable, both of whom lately have been blowing calls with incorrect predictions, at a major cost to all of us.
"We always use the terms 'expected' and 'unexpected' when a rate decision, earnings and other data emerge counter to our surveys" of economists, Bloomberg spokesperson Judith Czelusniak told AlterNet.
"For better or for worse, Wall Street is all a game of expectations," Paul La Monica, editor-at-large for CNN Money online, explained to AlterNet. "Stocks move based on how a number, be it an economic report or corporate earnings report, looks compared to expectations. That's an admittedly myopic point of view, but that's the way trading works."
Or doesn't. From ex-hedge funder Jim Cramer screaming at CNBC's Mad Money viewers to keep buying Bear Stearns stocks on the eve of its collapse, to the consensus of top politicians and economists totally missing the recession, and down to the current cheerleaders for our so-called economic recovery, the market has been a volatile mess for years because of suspicious expectations. Those unreliable sources and a great many other drinkers of guilt-free derivatives Kool-Aid thought they could keep shuffling stratagems and paper, and the market would just keep inflating. But anyone with an understanding of just the term "bubble" understands that it is defined not by its inflation, but its annihilation. If it doesn't pop, it isn't a bubble. End of lesson.
This unsustainable desire for prophets and profits has led us down some dark alleys, where reality has administered ceaseless beatings to our integrity and accounts. But not our perception, which as advertisers often say, is reality itself. For some reason, that desire for great expectations unmoored from reality perseveres, and remains enchanted by a political and economic paradise that is not only incorrect, but impossible. Instead of continuing to rely on those who can't seem to separate their perception from reality, we should be ignoring them outright. If anything, we shouldn't keep paying them for being wrong when it literally counts, which starts with the headlines and ends with our wallets.