Verify data; be aware of the source

By DAVID MOON, Moon Capital Management, LLC
December 18, 2011

Never trust the slope conditions as reported by the “snow phone” at a ski resort. According to them, the snow and the weather are always wonderful. Call the Domino’s Pizza closest to the resort. Their drivers will know the conditions of both the roads and the slopes.

Independent data is always preferable to self-serving information. Always question the motives of the source or the interpreter of the data.

I’ve often joked that the National Association of Realtors (NAR) will twist, manipulate or interpret any data series to prove that now is a great time to buy a house. Or sell a house.

Or they could simply report phony data.

It seems that the NAR has been reporting inflated house sales figures at least since 2007. CoreLogic, an independent real estate analysis firm, accused the NAR of releasing inflated sales data. NAR spokesman Walter Malony fessed up. “We’re capturing some new home data that should have been filtered out. All of the data since 2007 is being revised down. Sales were weaker than people thought.”

“Sales were weaker than people thought?” That makes it sound like it was the people’s fault, not the NAR.

The NAR expects the adjustments to be “relatively minor.”

However, CoreLogic says that just the California sales data alone could have been overstated by as much as 20 percent.

This will be a major surprise to many of you, but the federal government is, at times, also guilty of data mistakes. I’m sure it is completely inadvertent.

Economists argue about whether or not the Bureau of Labor Statistics reported CPI number over or understates inflation, but few believe it is an accurate reflection of changes in your monthly budget.

The federal government has a massive incentive to understate inflation. Lower inflation rates result in lower cost of living adjustments for social security and other pension recipients. It helps create a low-inflation façade in this country which keeps interest rates low – at least for a time. Lower interest rates reduce the amount of interest expense the federal government would otherwise be paying on our ballooning public debt.

Never trust retail sales data released by a retail trade organization. My December 4 column was highly skeptical of the early claims of a 16 percent year-over-year increase in 2011 holiday sales. Although it took another week or so to compile the data, independent researcher ShopperTrack reports what I anecdotally suspected on Black Friday: there were fewer shoppers in the stores on Thanksgiving weekend.

The 1.9 percent increase in retail sales that weekend was all due to higher prices, not increased shoppers or larger purchases.

For the whole month of November, retail sales increased a scant 0.2 percent, 60 percent less than the anticipated 0.5 percent increase.

A strategist from TD Securities said, “It’s fairly disappointing given that all of the evidence was pointing to fairly strong gains during the month.”

According to whose evidence?

Independently verify your data. Question the motives of whoever provides it.

David Moon is president of Moon Capital Management, a Knoxville-based investment management firm. This article originally appeared in the News Sentinel (Knoxville, TN).

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