Berkeley J-School students are in for a treat: Brad DeLong is going to explain to them how not to get snowed by politicians spouting economic statistics See Covering the Economy for a taste of what he’s up to.
Just a few basic rules — understanding trends, comparing like with like, doing everything in real dollars would be a good start.
And, Brad, I know you are mainly intersted in public data from federal sources, but may I mention one of my pet peeves? I hatehatehate the way the business section reports corporate profits. Neither I nor anyone else cares if profits were up or down twelve million percent over last year. That depends so much on what last year was like. We want to know how much it grew in real dollars, or maybe the ROI compared to last year, to other players in the industry, or the industry as a whole. Or anything else standardized and meaningful. BUT NOT % CHANGE OVER LAST YEAR. (Please?)
For the lay investor, this isn’t an easy task. They are reported as they are because percentage growth is a) very easy to provide, b) it doesn’t offer the transparency that competitors and investors can use against the corporation, and c) for the analysts, they’ve taken into account fluctuations in interest rates and exactly what last year was like. Remember, corporations aren’t going to readily volunteer that they did a really bad job (unless it is painfully obvious) because, after all, that reduces confidence in the company, and will probably cause issues increasing revenue in the future. If you really want to know what people expect or think, look at analyst predictions, corporate predictions, and the reaction of the stock market (e.g., Yahoo). Don’t blame the business section, everything else would be really hard for the business section to calculate before deadline.
Nobody with a brain cares about press-release announcements of earnings. We all go straight to the 10-Q and plug the numbers into our models while listening to the conference call on speaker. As a result, it’s the dumbest part of what is otherwise the smartest part of the press. Unlike the rest of the media, the business press actually has to remain conversant with the facts, which is why the FT and the WSJ (ex-editorials) are a hundred times better to read even on politics than the “papers of record.”
You may not like their prejudices (I don’t), but cavils about the business press ring hollow next to what the rest of the fourth estate produces (insert hock-ptui spitting sound here).
Even Noam Chomsky likes them.
Don’t blame the business section, everything else would be really hard for the business section to calculate before deadline.
We wouldn’t want to tax the poor business journalists by asking them to work, or anything…
Seriously, fish. They already get taxed enough at the bar.
“Nobody with a brain cares about press-release announcements of earnings”
That might be true, but it’s a damning indictment of the investment analyst community.