Some of economics can be frustrating because it is less objective than, say, math. But I would suggest that finance and statistics are just as frustrating. One financial analyst says that Microsoft is a buy and one says its a sell and they are both looking at the same data. Or what is worse, both rate it a strong buy because they are biased by their investment banking relationship and the average investor doesn’t know it!

It’s not proving a link between God and miracles. It’s about making decisions based on your view of the world. This is exactly why your source makes such a difference. My hope is that you haven’t made up your mind until you see the facts and you objectively view the situation from all points of view. The point isn’t to do battle over the analyses but to see through the bias in the analysis of others, get as much direct source information as possible, and use it so you can come to a more informed decision.

For example, many analysts rated dot-com’s a strong buy when anyone with their own brain saw that they weren’t earning any money. Following the heard cost a lot of people a lot of money.

And your opinion has to be more important than ANYone else’s as it’s what you are going to base your decisions on. Do you expand inventories or do you contract them? Do you issue new debt now or later? Do you acquire that competitor now or wait? These are the types of decisions you will be faced with eventually if you aren’t already.

Maybe a more concrete example would help. I think it’s wrong to buy long term bonds now because interest rates are likely going to rise and therefore their price will fall. I also think its a great time to issue long term debt for a company. At least refinance existing debt. I base this decision on my opinion of the market, not anyone on CNN or CNBC. I may very well be wrong, at least in the near term, and I am still looking for signs from the market that may change my mind.

 There is a cost to hedging, and that cost surely effects profitability. But as Fannie Mae moved to an “all time high” the markets became justifiably nervous about it. No reason to get that far out of line. They were caught by a flood of refi’s and had to scramble to get back in line. To me, this is a good example of how exogenous events effect model reliability and validity. In “normal times” the models are fine but they don’t account for events such as massive moves in refinancing. This may explain why the prediction of increased volatility in the duration gap is not occurring.

War, war, war, when will it ever start?  Powell didn’t convince everyone and the markets are not rising.  We did get good economic news as employment rose to 5.7% in January which occurred because of a seasonal hiring spree at stores, restaurants and bars.  But it fueled the first recorded U.S. job growth in four months but economists cautioned the gains appeared to be on paper only.  Analysts had expected the rate to hold steady with modest job growth instead of the payrolls increase of 143,000 — the largest since November 2000. That follows a loss of 156,000 jobs in December.  Again, the analysts expect it to get worse with war worries and companies failure to commit to the economic recovery. 

U.S. worker productivity abruptly reversed in the final quarter of last year as the economy slowed, the government said on Thursday, though gains for the whole year were the largest in over 50 years. A separate report showed a slight drop in the number of American’s lining up for the first time to claim unemployment benefits.

The Labor Department also reported that initial jobless claims for the week ending Feb. 1 fell by 11,000 to a seasonally adjusted 391,000. That was higher than the 389,000 expected by analysts and followed a revised 402,000 for the previous week.

John Snow got through his grilling on Capital Hill last week and became our new Treasury Secretary.  The replacement for SEC chair Harvey Pitt, William Donaldson was taking his turn at the grilling.  Only a couple of issues were painful and all expect the former head of the NYSE to be confirmed.  Interesting to note that it took this long and gave the ousted Pitt quite a bit of time to leave his mark on the agency.

U.S. consumer credit outstanding posted its biggest drop in 12 years in December, capping the slowest year for credit growth in a decade, the Federal Reserve said on Friday.  The central bank said consumer debt fell by $4.0 billion in December, the largest drop since a $5.8 billion decrease in December 1990, when the U.S. economy was in the throes of recession.

In percentage terms, consumer debt declined at a 2.75 percent annual rate in December, the biggest monthly decline since a 3 percent drop in April 1992.

The decline, which came as a surprise on Wall Street where economists had expected a $3.3 billion rise, followed a revised November drop of $100 million. The Fed had originally said credit decreased $2.2 billion in November.

November and December marked the first back-to-back decreases since May and June of 1992, when the economy was still crawling back from the 1990-91 downturn.

Maybe we do have all the stuff we need for awhile?