This Guest Voice post is by Michael Silverstein, a former senior editor with Bloomberg Financial News, who now writes financial poetry and prose in Philadelphia.
Confessions Of A Low Expectation Analyst
by Michael Silverstein
Do stock market moves confuse you? Do the prognostications of economists and policy makers seem at odds with reality? If so, I’m probably the reason. I’m a low expectation analyst.
What’s considered important in the world of economics these days isn’t actual facts, which have an annoying tendency to be less positive than experts would like them to be. What these experts focus on instead is something they term “analyst expectations.”
A group of analysts, maybe professional economists, maybe Wall Street supernumeraries such as myself, are polled about the size of an official economic number that’s scheduled to be announced in the near future. Their 20 or 30 guesses are then averaged, and the result is billed as “analyst expectations.”
A company losses a few billion dollars in a single quarter. Bad news? Not if the loss, in the Alice In Wonderland world of present day economics, was not as great as analyst expectations. Inflation comes in at a hair raising 0.8 percent one month. Bad news? Not if analyst expectations said it would come in at a full one percent, in which case the .08 percent is magically transformed into good news. Falling home prices, rising foreclosures, sky high monthly trade deficits. You name it. No matter how bad the official number, the real world number, if it¹s not as bad as the average guesses of a few people selected to play the analyst guessing game, the official number “beats analyst expectations” and we are all supposed to rejoice in consequence.
Where does someone like myself fit into this charade? I have become the indispensable man when it comes to converting scary economic reality into economic happy times. Someone is needed who always makes the guesses that ensure things always appear better than they really are. That someone is me.
My guesses on every conceivable upcoming economic statistic are so horrible that they invariably distort the averages dramatically. While other anointed analysts might guess an inflation increase that averages .05 percent one month, for example, I’ll project a jump of 3 percent for this same month, raising the overall average to a level that allows the official number when it’s reported “to beat analyst expectations.” With me contributing to the averages, you can bet that no matter bad a real economic number, it will always seem better than an analyst expectation average.
It’s long been thought that no one loves a Cassandra. But that’s only true if a Cassandra insists on being right. Being excessively negative in a way that lets the world look rosier than it really is, on the other hand, fulfills a genuine market need. The need to reassure Americans that the people they have entrusted with their economic futures aren’t really the incompetent, arrogant, massively over-compensated bunglers that recent realities suggest they most certainly are.
Copyright 2008 Michael Silverstein
Joe Gandelman is a former fulltime journalist who freelanced in India, Spain, Bangladesh and Cypress writing for publications such as the Christian Science Monitor and Newsweek. He also did radio reports from Madrid for NPR’s All Things Considered. He has worked on two U.S. newspapers and quit the news biz in 1990 to go into entertainment. He also has written for The Week and several online publications, did a column for Cagle Cartoons Syndicate and has appeared on CNN.