Lets Pretend

Since March, there's been a new fashion on Wall Street. It's called the Let's Pretend game.

Never mind about the hard actual number data, or even the actual anecdotal facts of someone telling you they've lost their job. Or the family is having mac and cheese every other night to pay the gasoline bill.

Wall Street has a new way of assessing circumstances.

First you have some money center bank or other stupid firm so good at managing their own affairs < like a 40% loss in 2008 > make a prediction about an economy or company. Then the actual figures are better then what they predicted. And presto, look at that. Things just got better. And that means they're going to get better still.

Forget if it's worse than the previous actual figure., or at best about as bad as the past few months. Forget if the year to year comparisons are still abysmal. It's BETTER than what was predicted. So like the mark-to-market rule where banks can make up whatever profit they want, now they are trying to create, and maybe succeeding in creating, the illusion that everything is getting better,  because the actual numbers are better than what they predicted.

I don't even think Orwell in 1984 thought it would get this silly.

And still it continues. Perhaps even worse.

Now companies like Texas Instruments increase in stock price, not because their sales are better than estimated. It's because their estimate of sales has increased from the previous estimate  forecast. The same is the case  for the recent surge in oil futures. Now, says the International Energy Agency, the fall in oil demand is expected to be less then previously estimated. < Remember that next time someone tells you energy prices are increasing because "recovering" economies need more oil . >

But all this estimating and better than estimated hype can have bad consequences, or as the lovable CIA says blowback. Today the Japanese stock markets are down. Why? The GNP growth is less than forecasted

As one astute investor has said, be careful what you wish for.

"Never make forecasts, especially about the future." - Sam Goldwyn