Friday, September 25, 2009

Fraud and Propaganda - The Norm

Even people with only a casual interest in real estate know that there are seasonal trends in home sales. When one talks of sales in a certain month it makes sense to compare those sales to the period from one year ago during the same month. Comparing a month to the month immediately preceding it is rarely useful unless there has been a change of more than 5-10%, as anything less is statistical and/or seasonal noise.

Statistics can certainly be manipulated by bulls, bears and agnostics alike. My bias is clearly bearish. What irks me is that mainstream financial reporting has not been truthful for a long time in the United States. This article on home sales is one of many typical examples.

The headline reads that home sales are up 0.7% (break out the champagne!), but only compared with the previous month. This change on a month to month basis is meaningless, as it is within the parameters of statistical noise. This is the incorrect headline for the data presented in this article from a rational/neutral point of view. Much more important are the following, quoted directly from the article [info in brackets is not a quote from the article]:

* Sales were 4.3 percent lower than the same month last year.
* The median price [of homes dropped] to $195,200, off 11.7 percent from $221,000 a year earlier and 9.5 percent below July's level of $215,600. That was the largest monthly drop on records dating to 1963 [i.e. not statistical, month-to-month noise, but a meaningful price decline in only one month!].
* It's taking more than a year to sell the homes on the market.

A meaningful and realistic headline would have been that residential real estate is still doing poorly according to the new data. So why the spin? Why is the news no longer real but instead an Orwellian collection of garbage meant only to paint a rosy picture and ignore anything that would make a bad headline at all costs?

Perhaps this is why an increasing number of people (like myself) no longer trust or rely on mainstream media sources for the news. Dumbing down data points and spinning everything in a positive light to make a bullish headline regardless of reality is not news, it is propaganda and dishonest. It is doing people a disservice to tell them that real estate is bottoming or about to turn (newsflash: it's not) when this is not what the data indicates. Good money will end up chasing bad for anyone who relies on the media to tell the truth. Since I and my fellow taxpayers are now being put on the hook for these bad real estate investment decisions, I would prefer the media tell the truth on this issue.

Conspiracy theories aside, there is a vested interest of many media companies in not telling the truth, but rather saying what won't offend their advertisers. The "don't worry, be happy and consume more" crowd is helping to push many people (its customers) off the debt and stock market cliffs and into the economic abyss. Remember, though, that it takes two to tango. Watch, read and listen to such intentionally misleading data sources at your own peril.

Wikinvest Wire