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Saturday, June 4, 2011

How to read financial news- A Primer

 ~ "Aww, but Marge- we can cuddle tomorrow.. I want to learn how to read"

Let's have some fun--  We're going to break down the essential elements of basically every financial news story written so you know what to look for and can decipher on your own facts from fictions.  Basically, you will find in Every article 4 elements placed in some random order:  1) statistical facts, 2) BS optimism and rationalization, 3) the investing hard-sell and lastly  4) statistics shoved at bottom that contract the optimism.

As an example, we'll break down an article written today from Bloomberg entitled:  Dow has its longest weekly slump since 2004.  We could have used practically Any article but this was the first I spotted and it works quite well--

"U.S. stocks fell this week, sending the Dow Jones Industrial Average to its longest streak of losses since 2004... Labor Department figures showed payrolls increased by 54,000 last month, falling short of the median forecast in a Bloomberg News survey that called for a rise of 165,000. The jobless rate climbed to 9.1 percent."

Ok,, that was the statistical facts portion.. it tells the reader what's going on with no pretenses..  Now, here comes the BS optimism and rationalizing portion..

"Michael Shaoul, whose Marketfield Fund Ltd. beat 81 percent of competitors last year, said that while the payrolls report was disappointing, it may also be a signal the slowdown in the economic data is near its peak. Private-sector hiring has risen by an average 145,000 a month over the last year, faster than economists had predicted, according to Shaoul. He noted that weaker nonfarm payrolls reports in February and July 2004 failed to derail the last bull market, which peaked in October 2007."

So according to this Mr. Nobody, all is not bad with the economy because this 'slowdown' that No One predicted based on how misguided all the predictions were this week, is magically 'peaking'.    Mr Nobody also mentions private sector hiring at 145k monthly.  Ask yourself this- if private sector hiring was producing a strong 145k monthly, wouldn't it have caused May's hiring figures to raise beyond 54k?   Lastly because Mr Nobody's interest is solely in the markets and not the overall economy or how 98% of the nation is coping, he spins a couple nonfarm payroll reports to give comfort to the cockroaches to stay invested in this terrific bull market.

Yes.. quite Bull.

OK.. Now onto part 3- the Investment hard-push section--

"“Investors should be looking for buying opportunities,” said Byron Wien, the vice chairman of Blackstone Advisory Partners, whose parent, New York-based Blackstone Group LP, is the world’s largest private-equity firm. “The economy is not as bad as it looks right now. Corporate profits will be good, very good. People are asking me, ‘Do you still think the market can get to 1,500 (S&P) by the end of the year?’ I do.”"

Yes.. let's see.. the economy is not bad at all.. of course.. silly me..  and Why is it not bad? Oh because of corporate profits.  Yes.. of course.  And why are profits so good?  A little thing called QE 1 and QE 2.   And who is footing the $2 Trillion bill for that?  Oh, just the bottom 98% who got no benefit from either QE- heh heh, those silly taxpayers.   And what does Mr Wein-erschnitzel suggest we glean from this past week?   Why it makes for a lovely Buying Opportunity for certain!  

Evil.

And now the final section of practically Every financial article written by Every corporate news source-  the statistics shoved at the bottom which contradict the optimism--

"Manufacturing expanded at the lowest pace in more than a year... more Americans than forecast filed applications for unemployment benefits.  Newell Rubbermaid declined 15 percent... J.C. Penney declined 10 percent...  Stanley Black & Decker retreated 6.1 percent... The Morgan Stanley Cyclical Index sank 3.9 percent this week... Limited (brands, Ltd.) fell 4.9 percent... Gap lost 6.7 percent...

On and on and on...

And now you know how to read financial news.  So Go Out young man (and woman) into the brave new world, and make your Fortune! (Or wake up and stop the delusion that 2011 is 2006..   It's totally your call)

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