Some people might decide to use the typical warning about building your house on a foundation of sand.
I, however, choose to view our current situation as more of “The Emperor’s New Clothes.”
I want to scream “cheat, liars, fraud,” every time I hear a purported significant financial or economic announcement.
Let’s start with earnings season.
Every analyst continually lowers their estimate so the company they follow will be able to hear the Bloomberg announcement of “great news, they beat the street.”
Do they announce comparisons of prior quarters or evaluations of previous years with the same flourish?
Of course not.
Next, it’s the financials, a sector that for several quarters has only been able to show positive earnings by using accounting trickery.
Specifically, the movement of reserves being placed on balance sheets and counting this action as a profit as revenue dwindles and true profitability goes up in smoke.
However, the smoke is being used in conjunction with mirrors in order to produce balance sheets that utilize mark-to-model or fantasy, take your choice, versus the true valuation called mark-to-market.
When the mark-to-market accounting standard was utilized in 2008, total chaos ensued as the true condition of the too-big-to-fail banks became known. The sale of bonds, whether U.S. or European, when shown with full transparency simply becomes a movement from central bank to sovereignty and back again, creating the image of demand but not the reality of weakness and erosion. The unemployment rate, once a true picture of the country’s health, has been diluted with birth/death models that change the real picture at the whim of a bureaucrat.
In addition, millions of unemployed no longer receiving some kind of governmental benefit are not included on participation figures. Does any member of the media (besides our finance editor, John Ransom) ask “how did these folks just disappear?”
Of course not.
Finally, new home sales. For a long period of time, a simple deposit of a few hundred dollars was enough to hold a house for several months. The irony is that simple transaction was counted as a sale in the national statistics.
In addition, being multiple listed; it was counted as a sale for each listing! These are just a few of the lies, fabrications, and outright deceits being perpetrated on the consumer, the citizen, and the investor.
I guess as long as the general public accepts these fallacies as truth, we’ll continue to be fed these falsehoods on a daily basis. H
eaven help us when some random citizen screams “The King has no clothes on.”
Along with his 40-years of dedication in the financial services industry, Bill is the President and CEO of GPSforLife, has recently authored a highly successful book entitled 44th: A Presidential Conspiracy, publishes his dynamic monthly financial newsletter MacroProfit, and faithfully continues his third decade on the radio with It’s All About Money, which can be heard weekdays on Money Radio in Phoenix and in podcast form on his website (and on smartphone apps) published at billtatro.com weekdays at 5pm Eastern. Bill can be reached via email at firstname.lastname@example.org and on Twitter @tatroshow.