Exposing the Retail Expectations Game

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

NEW YORK (BullionBullsCanada) -- Bloomberg trumpeted a "statistic" a couple of weeks ago called the Citigroup Surprise Index.

Even before I learned what this tool was supposed to represent, I had to laugh. Given the endless, serial-fraud from Wall Street, I couldn't help noting that the Citigroup Surprise Index sounded like the sort of sickening discovery that MF Global's clients made the morning after discovering that roughly $1 billion of their funds had been plundered by unscrupulous banksters.

In fact, however, the index is not some "thermometer" providing us with data on the current level of Wall Street thievery. Rather, it is something much more absurd: a measurement of how often the U.S.'s blatantly fraudulent economic statistics "beat expectations."

The fundamental criticism of this silliness is that it obviously has no meaning whatsoever, or more specifically it could be interpreted to mean anything.

The Citigroup Surprise Index supposedly shows that the official statistics "beat expectations" on a regular basis that this is good news. There is absolutely no logical validity in such a conclusion.

There are several things implied when the experts consistently miss on their "expectations." First of all, being increasingly wrong on their expectations simply implies incompetence. The most obvious meaning of the Citigroup Surprise Index is that the so-called experts are going through another period of extended ineptitude.

Note that the index isn't simply measuring these experts being "wrong," but rather specifically recording how they have consistently under-shot the numbers with their projections. This strongly suggests a negative bias among these experts. Of course these explanations presume sincerity among these participants, but there is a more sinister, more plausible explanation of the Citigroup Surprise Index.

First, we need to acknowledge the obvious game which Wall Street has made out of "beating expectations." After decades of relentless brainwashing they now have their media parrots perfectly trained. For these talking-heads, announcing whether a particular number "beat expectations" has now become more important than the number itself.

How did our markets ever reach such a state of logical perversity? Quite simple. The Wall Street banksters have managed to convince both the media and market-sheep that expectations are always "priced-in" prior to an actual number being announced.