The Best of Five Things You Need to Know: Major Statistical Errors in Economics, Modern Cellphone Usability, Don't Judge a Housing Market Book By Its Book Cover, Wait! Title Revision! Title Revision!, Coup D'hoorah!
What you needed to know (and what it meant)!
The Best of Minyanville's daily Five Things You Need to Know to stay ahead of the pack on Wall Street:
1. Major Statistical Errors in Economics
Minyanville has learned that statistical errors in economics reporting are actually far more common than one might think, especially before the computer age.
- England's Office for National Statistics discovered a major statistical error in reporting inflation yesterday.
- The error reduced overall inflation from 3.4% to 2.2%, quite a haircut, and it will likely reduce the chances the Bank of England will raise rates at its next meeting.
- It turns out, however, that major statistical errors in economics have occurred quite frequently over the years.
- Below are some Major Statistical Errors in Economics throughout history Minyanville has uncovered:
Minyanville Flashback: Major Statistical Errors in Economics
400,000 BCE: Homo sapien 1 crushes skull of homo sapien 2 with boulder after economic release mistakenly shows dramatic 100% decline in expected fish output. Homo sapien 1 later learned the error was related to demographics and an increase in dinosaur population shortly before being eaten.
June 21, 1979: President Jimmy Carter signs Congressional bill mandating 68% tax increase on The Man after a statistical error in US Census Bureau Report incorrectly showed The Man's share of total US wealth had risen to 99% of GDP from its actual reading of 98% of GDP.
November 18, 1983: All beige books in Kansas City, MO libraries are burned after local television news station anchor mistakenly reports economists believe "beige books" indicate pending recession. It was later learned that economists believe the Fed's Beige Book report indicates a pending recession, not beige books in general.
February 9, 1998: Stock market rallies 23% after then-Federal Reserve Chairman Alan Greenspan inadvertently substitutes Crazy Eddie Discount Electronics ad for interest rate testimony and promises to slash short-term Fed Funds rate to 90 days same as cash.
2. Modern Cellphone Usability
Three quarters of Motorola RAZR users say they would not buy another Motorola (MOT) handset because they are difficult to use, according to a poll by Mobile.
The story of the first cell phone - a modern miracle of usability!
The first "mobile" cellular telephone, checking in at just under five feet tall by nine feet wide and weighing a little more than 897 pounds, was a modern miracle of usability.
Those wealthy and privileged few, the "early adopters" of this miraculous technology, were able to enjoy telephone access anywhere, at virtually anytime, by following just a few simple procedures.
Early Mobile Cellular Telephone Usability
In order to place a mobile telephone call, "on the go," as it were, users of the first mobile cellular telephone simply needed to attach the sub-thermal-nuclear pinchon device to a portable land-based siftergram station and dial 9 for outside line access.
After the successful dialing of "9," the mobile cellular telephone call was then quickly routed to a computer bank in Palo Alto, CA.
From Palo Alto the call was then reprocessed and formatted for Type 3XT multi-linear cable form feed and hole punch capability by a MagnaFiler 14RP1999 Crimpshaft Telefeed.
Once reprocessed and successfully formatted, the mobile cellular telephone signal was then transmitted to a satellite via the Cruickshank Demi-Codpiece Modular Five-Speed Mobile Teletravel Device (14 MPG Highway).
The satellite would then beam the reprocessed mobile cellular telephone signal to a signal receptor station in Midlothian, TX where Ms. Eleanor Johnston would hand copy the message, re-typeset, format and boldface...
... the conversation for verbal processing by a group of high school students with a convertible Buick and a Mr. Microphone playset.
The high school students would then drive by the designated mobile cellular telephone call recipient's house in the convertible Buick and broadcast the message, which typically was something along the lines of "Hey good lookin', be back to pick ya up later," or "Guess what? I'm calling you on a mobile cellular telephone," through the Mr. Microphone AM radio transmitter.
The recipient of the call would then rush to a land-based telephone
and call the original sender of the mobile cellular telephone at a designated telephone booth just outside of Santa Fe, New Mexico.
While seemingly complex by today's standards, the process was actually relatively quick taking just under 7 hours from start to finish.
3. Don't Judge a Housing Market Book By Its Book Cover
This morning we stumbled across the following blog, "David Lereah Watch," on a tip from Barry Ritholtz's Big Picture.
- As Five Things readers already know, we're slightly wary of taking at face value any housing market analysis from Lereah, the author of "Are You Missing the Real Estate Boom? Why Home Values and Other Real Estate Investments Will Climb Through the End of the Decade - and How to Profit From Them," not so much because of the fact he wrote a book that is super bullish on real estate, but because he is the "chief economist" for an organization (the National Association of Realtors) whose self-described mission is to help its members (realtors) become more profitable.
- There is absolutely nothing wrong with the NAR helping realtors become more profitable. We just don't expect to hear impartial housing data analysis from someone employed by the NAR.
- In the old days they would have called that a "conflict of interest." Today it's called "being a chief economist."
- Anyway, we ran across this Lereah blog and discovered that you really can't judge a book by its cover, not when the cover changes every year based on the incoming housing data.
- Take a look. You can't make this kind of stuff up.
4. Wait! Title Revision! Title Revision!
According to its 3Q 2006 U.S. Foreclosure Market Report released today, RealtyTrac reported that 318,355 properties entered some stage of foreclosure nationwide, an increase of 17 percent from the previous quarter and a 43 percent increase from the third quarter in 2005.
- "What our third quarter research appears to be showing is that the first wave of adjustable rate mortgages is having a negative impact on the number of homes going into foreclosure," said Saccacio. "With the volume of these loans--more than $1 trillion of them due to adjust over the next 15 months--this is a trend that definitely bears watching," DSNews.com reported.
- A 55 percent increase in foreclosures launched Florida as the leading state with total foreclosure filings during the third quarter.
- James J. Saccacio, chief executive officer of RealtyTrac, states that hikes in interest rates and a slump in the market are two key factors to the 43 percent increase since third quarter 2005.
- The bad news here is that Lereah's publisher is probably going to have to change that book cover... again.
In 2005, National Association of Realtors Chief Economist David Lereah released the book,
"Are You Missing the Real Estate Boom? Why Home Values and Other Real Estate Investments Will Climb Through the End of the Decade - and How to Profit From Them."
Interestingly, the title for the 2006 edition of the book was changed to:
"Why the Real Estate Boom Will Not Bust - and How You Can Profit From It."
Below are Minyanville's suggestions for subsequent title revisions in later editions of Lereah's book through 2015:
2007: "Why the Real Estate Boom Will Not Bust and How Foreclosures are Technically Part of the Continuing Real Estate Boom, In a Way."
2008: "Why the Real Estate Boom in Distressed Properties Will Not Bust (except in certain local markets) and How You Can Use Leverage to Profit From It."
2009: "Why the Phrase "Real Estate Boom" is Often Misunderstood to Mean Higher Prices and How You Can Pray for Them."
2010: "Why the Real Estate Boom Will Soon Bounce Back and How to Eventually Profit From It."
2011: "Why Did I Have to Write "The Real Estate Boom Will Not Bust Through the End of the Decade" and How Did I Not Realize How Long A Decade Really Is?"
2012: "Oh, Dear God, Please, Please Let the Real Estate Boom Bounce Back... and How You Can Profit From It."
2013: "Please, Please, Just Let the Real Estate Boom Come Back This One Time for This One House and How You Can Break Even From It."
2014: "Why I Am Willing to Accept a Small Loss of 35% On the Real Estate Boom and No Longer Care About How to Profit From It."
2015: "Why Can I Maybe Borrow a Couple Dollars Off You Until the Real Estate Bust is Over?"
5. Coup D'hoorah!
After an initial few hours of uncertainty, fund managers now believe the "bloodless" coup in Thailand may prove a "boon" to the market over the long term, the Wall Street Journal reports.
- "A new government could be the incentive that has long been lacking in this market," Shane Oliver, Sydney-based head of investment strategy and chief economist at AMP Capital Investors, told the Journal.
- Hong Kong research-and-securities firm CLSA Ltd. raised its recommended Thai holdings in an Asia portfolio, excluding Japan, to 4% from 3%
- The governor of Thailand's central bank, Pridiyathorn Devakula, said the change in government should help the country's economy move forward, the WSJ reported.
- Here's what I'm thinking: A dedicated coup fund focused on investing in countries with newly deposed governments.
- Let's look at other leaders who came to power via coups:
Muammar al-Qaddafi, leader of Libya
Teodoro Obiang Nguema Mbasogo, President of Equatorial Guinea
Lansana Conté, President of Guinea
Blaise Compaoré, President of Burkina Faso
Zine El Abidine Ben Ali, President of Tunisia
Omar Hassan Ahmad al-Bashir, President of Sudan
Yahya Jammeh, President of The Gambia
Pervez Musharraf, Chief of Army Staff and President of Pakistan
François Bozizé, President of the Central African Republic
Ely Ould Mohamed Vall, Chairman of the Military Council for Justice and Democracy in Mauritania
- That list reads like the Dow Jones of dictators.
- As an investor in the Coup Fund you can look forward to quarterly letters such as this:
The third quarter posed significant challenges for the Coup Fund. First our chief quantitative strategist was kidnapped in early May in Tunisia by leftist insurgents. We suffered a 3% loss in June due to forex losses involved in the ransom. (The kidnappers refused to accept payment in US dollars.) Next, we seized (Ha ha! Inside Coup Fund joke!) what we thought was a low-risk opportunity in The Gambia for tapioca futures but suffered a loss because our head trader misinterpreted the Wolof word for "sell" as "double down."
Nevertheless, we remain convinced that our strategy will see us through difficult times. We have recently added the following new and improved risk control measures:
- 14 armored Hummers
- Infrared goggles and personal safety flares for fund employees
- One (1) Wolof language dictionary.
Make no mistake, investor. At the Coup Fund we recognize that tough times call for a disciplined strategy of militaristic control and defense. We are well aware of the investors in our fund out there plotting, plotting, plotting against us. Always with the plotting. We have improved our defenses, however, and any attempt to marshal forces against us will be met with swift and uncompromising action. We have instructed our security detail to imprison the authors of any redemption letters.
Our leadership may seem harsh, but it is carried out with your best interests as an investor in mind.
His High General Marcus Aurelius Weatherford
Chief Investment Officer
The Coup Fund
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