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EJ
04-25-07, 01:23 PM
http://www.itulip.com/images/middleunite.jpgWhen Bad News Stops Being News

Language and financial news mix are a function of the economic cycle
"As times get harder, words grow more weaselly. Euphemisms boom in a recession, even if nothing else does." - Alison Eadie
There are many ways to get your bearings in an economic cycle. None is so reliable as a growing gap between words used to describe the current state of the economy and conditions observable on the ground. The language chosen by those with the most to lose when the economy turns down, politicians and bankers, reflects at first their hope and later their denial. Softening the language used to describe the state of an economy heading into trouble is a time-tested tradition, going back to the turn of the century when government and banks first came to be seen as stewards of the economy. The Fed and Congress were given and accepted responsibility for both its successes and failures, deserved or not, and their choice of words reflects the natural human tendency to take credit for the former and give distance to the latter.
Where economic misfortune is concerned, a word on nomenclature is necessary. In the course of his disastrous odyssey Pal Joey, the most inspired of John O'Hara's creations, finds himself singing in a Chicago crib strictly for cakes and coffee. He explains this misfortune by saying that the panic is still on. His term–archaic and thus slightly pretentious–reflects the unfailing O'Hara ear. During the last century and until 1907, the United States had panics. But, by 1907, the language was becoming, like so much else, the servant of economic interest. To minimize the shock to confidence, businessmen and bankers had started to explain that any current economic setback was not really a panic, only a crisis. They were undeterred by the use of this term in a much more ominious context–that of the ultimate capitalist crisis–by Marx. By the 1920's, however, the word crisis had also aquired the fearsome connotation of the event it described. Accordingly, men offered reassurance by explaining that it was not a crisis, only a depression. A very soft word. Then the Great Depression associated the most frightful of economic misfortunes with that term, and economic semanticists now explained that no depression was in prospect, at most only a recession. In the 1950s, when there was a modest setback, economists and public officials were united in denying that it was a recession–only a sidewise movement or a rolling readjustment. Mr Herbert Stein, the amiable man whose difficult honour it was to serve as the economic voice of Richard Nixon, would have referred to the panic of 1893 as a "growth correction."

<a href="http://www.amazon.com/gp/product/0735100705?ie=UTF8&tag=wwwitulipcom-20&linkCode=as2&camp=1789&creative=9325&creativeASIN=0735100705">Money: Whence It Came, Where It Went</a><img src="http://www.assoc-amazon.com/e/ir?t=wwwitulipcom-20&l=as2&o=1&a=0735100705" width="1" height="1" border="0" alt="" style="border:none !important; margin:0px !important;" />
A feature of the early stages of recession: long before a recession across multiple sectors and geographic regions becomes an official Recession, new problems that develop in one sector of the economy are blamed on problems that are already apparent in another.
(http://yahoo.reuters.com/news/articlehybrid.aspx?storyID=urn:newsml:reuters.com: 20070423:MTFH11544_2007-04-23_18-10-25_N23415999)
GM's Lutz says mortgage 'meltdown' hits U.S auto sales (http://yahoo.reuters.com/news/articlehybrid.aspx?storyID=urn:newsml:reuters.com: 20070423:MTFH11544_2007-04-23_18-10-25_N23415999)
Apr 23, 2007 (Reuters)

The crisis in the U.S. mortgage market has hurt U.S. auto sales this month, General Motors Corp. (GM.N: Quote, Profile , Research) Vice Chairman Bob Lutz said.
Shifts in official language and the public mood reflect each other at various points in economic cycles. While researching iTulip back in late 1997, nearly ten years ago, several times I visited the Victor Hugo used book store on Newbury Street in Boston–sadly out of business, a victim of the Internet and more profitable luxury goods retailers competing for the space. Among the Great Depression era gems I picked up was an original copy of "The Bubble that Broke the World," penned by Garet Garret in 1932. Victor's kept a vast array of old magazines in its basement archive. I bought a bunch, and will post scans of some of the more intriguing pages in the future. I poured over old issues of Time and Life, as well as periodicals of the era that are no longer with us. The liberal Atlantic prevails, the libertarian American Mercury edited by H. L. Mencken is no more. If H. L. Mencken were alive today, he'd put libertarian bloggers to shame by sheer volume of what today is called "content" but was then called writing. His politically incorrect writing earned him many labels, some deserved, others not.
During the first half of the twentieth century, H. L. Mencken was the most outspoken defender of liberty in America. He spent thousands of dollars challenging restrictions on freedom of the press. He boldly denounced President Woodrow Wilson for whipping up patriotic fervor to enter World War I, which cost his job as a newspaper columnist. Mencken denounced Franklin Delano Roosevelt for amassing dangerous political power and for maneuvering to enter World War II, and he again lost his newspaper job. Moreover, the President ridiculed him by name.

“The government I live under has been my enemy all my active life,” Mencken declared. “When it has not been engaged in silencing me it has been engaged in robbing me. So far as I can recall I have never had any contact with it that was not an outrage on my dignity and an attack on my security.”

Though intensely controversial, Mencken earned respect as America's foremost newspaperman and literary critic. He produced an estimated ten million words: some 30 books, contributions to 20 more books and thousands of newspaper columns. He wrote some 100,000 letters, or between 60 and 125 per working day. He hunted-and-pecked every word with his two forefingers—for years, he used a little Corona typewriter about the size of a cigar box.

Certainly Mencken was among the wittiest. For example: “Puritanism—the haunting fear that someone, somewhere may be happy. . . . Democracy is the theory that the common people know what they want, and deserve to get it good and hard. . . . The New Deal began, like the Salvation Army, by promising to save humanity. It ended, again like the Salvation Army, by running flophouses and disturbing the peace.”

Ideas on Liberty - September 1995 (http://www.fee.org/publications/the-freeman/article.asp?aid=4506)
http://www.itulip.com/images/ice-house.jpgAs I read the musty magazines it struck me that among those published during The Great Depression, there was hardly an article that covered The Great Depression itself. No pictures of soup lines. No statistics on employment or production. No heated arguments about the causes and solutions to the crisis. It was as if from a "news' standpoint the Depression did not exist until after it ended. After a recession drags on for several years, the audience of readers interested in abstract theories about the causes dwindles. Everyone is busy fighting for a slice of the shrinking pie. Positive economic developments are news; bad economic circumstances are not.

Recall that not so long ago when you opened up a newspaper you might see an occasional article reporting bad financial news scattered like sprinkles ("Jimmies" if you're from the Northeast US) atop a mountain of financial ice cream. At this point in the cycle there is still plenty of ice cream, primarily in the form of news of the latest leveraged buyout or other multi-billion dollar deal. Wantonly mixing metaphors, a growing number of bad news articles during the relatively good economic times we are enjoying today are what our editor Jane calls "financial porn," along with the articles, such as in the Wall Street Journal today, about the trend of the super-rich to buy vast tracks of land. As we head into Recession 2007 (http://www.itulip.com/forums/showthread.php?t=550), we are sure about this if nothing else: editors will know when their readers have lost their taste for bad news. If the economy and markets stay down for long, don't expect to read about it in the paper. The paper won't be reporting it and you won't be in the mood. Based on historical precedent, a lack of reporting of bad news may be the only reliable indicator that the worst is over.

http://www.itulip.com/images/endisnear50.jpgThat turn is several years away. Between now and then, the virtuous circle of rising home prices, falling interest rates, and loose lending standards will run backwards as a vicious circle of price declines, rising interest rates, and credit contraction. Soon a similar reversal will occur in the LBO market, leading to further cost cutting in the corporate sector, meaning layoffs. Rising unemployment will feed into falling real estate prices.

For now, paradoxically, the appearance of bad economic news in press reflects the optimistic public mood that developed out of years of economic recovery, declines in consumer confidence–in iTulip parlance, a measure of consumers' expected future access to credit–notwithstanding.
Existing Home Sales Plunged in March (http://biz.yahoo.com/ap/070424/home_sales.html?.v=13)
April 24, 2007 (AP)
Sales of Existing Homes Plunged Last Month by Largest Amount in 18 Years

Las Vegas housing slump worsens (http://www.inbusinesslasvegas.com/2007/04/20/feature1.html?)
April 24, 2007 (In Business Las Vegas)
Prices plummet as existing-home inventory hurts new-home sales

The price of new homes has tumbled nearly 10 percent this year, the inventory of existing homes has reached an all-time high and bank repossessions accounted for a greater percentage of existing home sales in Las Vegas, according to the March housing statistics.

Gas prices going, up, up, up (http://www.coloradoan.com/apps/pbcs.dll/article?AID=/20070425/UPDATES03/70425023)
April 25, 2007 (The Coloradoan)

A rising demand combined with record low gasoline inventories could reach $4 per gallon by this summer, according to Bloomberg News. Economic and population growth has caused the gasoline consumption rate to double since this time last year, the Bloomberg News reported.
And so on. However, these news items from a downturn in progress pale beside this dark prognostication.


"The middle classes could become a revolutionary class. The growing gap between themselves and a small number of highly visible super-rich individuals might fuel disillusion with meritocracy, while the growing urban under-classes are likely to pose an increasing threat... Faced by these twin challenges, the world's middle-classes might unite, using access to knowledge, resources and skills to shape transnational processes in their own class interest."

Who authored this dire prediction? A mad-bear blogger in his basement? Nope. This comes from a new report from the UK Defense Ministry's Development, Concepts and Doctrine Centre (PDF) (http://www.mod.uk/NR/rdonlyres/5CB29DC4-9B4A-4DFD-B363-3282BE255CE7/0/strat_trends_23jan07.pdf). The report argues, among several intriguing ideas, that the era of major wars between nation states is over, but that cooperation among nation states on policies that produce ever greater disparities of wealth will usher in an era of class warfare between classes of citizens across national boarders. The good news is that this economic armageddon is not due to occur until 2035. For now, while times are good, it makes entertaining reading.

iTulip Select: The inside scoop (http://www.itulip.com/forums/showthread.php?t=1032).
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grapejelly
04-25-07, 01:45 PM
I read of a trading system that involves your getting news stories and rating them by prominence, length of article, above or below the fold (this was in the days people actually read newspapers) and so forth. You gave them a simple points system and traded based upon the points totals.

It would be easy to put together a points system but what may be more interesting is month-over-month or y-o-r rate-of-change of the points for various stories...hmmmmm....

sidenote:
(And I do think that Robert Prechter's research here is really spot-on. His Socioeconomics books are fantastic. Whether you could trade a system like this or whether it's simply done by empirical observation, I couldn't say.

(According to Prechter, there are waves of optimism and pessimism, what he calls social moods, and these move markets rather than the other way around.

(You observe social moods through more than just reading the news. It's in the colors that are in.

(And remember the skirt lengths relationship to the economic times?

(And it's music -- whether dark music is in, or light music. And the type of movies that are popular, and the sorts of things that are big in the popular culture.)

fightthepower
04-25-07, 02:33 PM
Social mood, is the key. It isn't what happens, its how you react to what happens. Right now, any news is interpreted to be good news. At the bottom, all news will be bad.

bart
04-25-07, 02:43 PM
...
I bought a bunch, and will post scans of some of the more intriguing pages in the future.
I poured over old issues of Time and Life, as well as periodicals of the era that are no longer with us.
...


I'm very much looking forward to seeing those.

Martin Armstrong, in his book "The Greatest Bull Market In History" (http://web.archive.org/web/19980523082828/http://www.princetoneconomics.com/Research/GBM/GBM-MAST.HTM) also liberally quoted from Time and also included ads that were quite interesting.


"FLOWN DOLLARS"

"Dollars sank last week to the lowest level since the U.S. quit the gold standard, 63 cents. Because President Roosevelt had not yet seen fit to devalue the dollar, the price is determined by supply and demand in international exchange. And because the U.S. has a favorable trade balance, demand is normally greater than supply.

Whence the dollar flood has eaten away 35 cents of every 100 cents in each U.S. dollar since last April. Continental money-changers, canniest of whom are reputed to be ‘the Greeks,’ delight in selling dollars short, but bankers know that accounted for only a fraction of the drop. Last week from the British Commonwealth Relations Conference in Toronto came confirmation of what Wall Street has long suspected; that U.S. citizens have exported their dollars by the hundreds of millions.

"‘One of our problems,’ droned Viscount Cecil of Chelwood, chairman of Britain’s delegation, ‘is the flood of unwanted money that is pouring into our banks. These funds, deposited in the main by U.S. investors, are subject to withdrawal at 24- hour notice and are of little or no value, though it has not yet been discovered how to get rid of them.’

"Standard Statistics Co., Inc., world’s largest figure factory, estimated that $1,000,000,000 had flown the Atlantic, the bulk of it to London. France, whose tie to gold is none too secure, has received little, but Holland and Switzerland have been drowned in dollars. Unlike exports of gold which is strictly banned (for private citizens) the flight from the dollar has been quietly encouraged by Washington; it pushed down the price without requiring devaluation by Presidential decree."

-- Time magazine, September 25, 1933 edition

kelton56
04-26-07, 01:38 PM
...news items from a downturn in progress pale beside this dark prognostication.
"The middle classes could become a revolutionary class. The growing gap between themselves and a small number of highly visible super-rich individuals might fuel disillusion with meritocracy, while the growing urban under-classes are likely to pose an increasing threat...
This is right out of George Orwell's 1984, Chapter 9:


...Throughout recorded time...there have been three kinds of people in the world, the High, the Middle, and the Low...The aims of these three groups are entirely irreconcilable. The aim of the High is to remain where they are. The aim of the Middle is to change places with the High. The aim of the Low, when they have an aim -- for it is an abiding characteristic of the Low that they are too much crushed by drudgery to be more than intermittently conscious of anything outside their daily lives -- is to abolish all distinctions and create a society in which all men shall be equal.


Thus throughout history a struggle which is the same in its main outlines recurs over and over again. For long periods the High seem to be securely in power, but sooner or later there always comes a moment when they lose either their belief in themselves or their capacity to govern efficiently, or both. They are then overthrown by the Middle, who enlist the Low on their side by pretending to them that they are fighting for liberty and justice. As soon as they have reached their objective, the Middle thrust the Low back into their old position of servitude, and themselves become the High. Presently a new Middle group splits off from one of the other groups, or from both of them, and the struggle begins over again. Of the three groups, only the Low are never even temporarily successful in achieving their aims.


But the problems of perpetuating a hierarchical society go deeper than this. There are only four ways in which a ruling group can fall from power. Either it is conquered from without, or it governs so inefficiently that the masses are stirred to revolt, or it allows a strong and discontented Middle group to come into being, or it loses its own self-confidence and willingness to govern...

Perhaps 1984 was only 50 years early. 2034 should be just about right according to the DCDC Strategic Trends Report.

spunky
04-27-07, 10:16 AM
This is right out of George Orwell's 1984, Chapter 9:


Perhaps 1984 was only 50 years early. 2034 should be just about right according to the DCDC Strategic Trends Report.



This has been going on in any industrial society for a long time.



Someone on CNBC , named Peter actually spoke the truth, just now about the DJI and Gold ratio, and the total weakness of the american stock market sweet :D
I gotta write this down

jk
04-27-07, 07:17 PM
This has been going on in any industrial society for a long time.



Someone on CNBC , named Peter actually spoke the truth, just now about the DJI and Gold ratio, and the total weakness of the american stock market sweet :D
I gotta write this down

peter schiff? if so, you might want to search itulip for past discussions about him and his ideas.