Maven: Haunted by Poor Reporting on GDP

It's baa-aack: a torrent of comment without context. Plus, online gambling's creep.
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Oh, how it grieves The Business Press Maven to see the business media mislead investors again and again and again on gross domestic product numbers.

Trust me, it's scarring to have to go through this

once more.

But in order that your perceptions are not undermined on these third-quarter numbers by such an obvious disregard for history, I will suffer through it again.

But business media, heed my warning: If you keep making this mistake, I will reach into my arsenal of awards for idiocy and pull out something that will make you cry and wish you had become English professors.

You want the public to trust you? How about, as a modest little start, earning that trust?

The Commerce Department reported Friday that the economy expanded at a 1.6% rate during the third quarter.

That's only a preliminary number, right? And, as I've shown you time and again, it is often revised, right?

Well, from

Reuters

to

Alan Abelson

, the

Barron's

columnist who has predicted 24 of the last three recessions and spoke this weekend of the "really punk showing of the economy," referring to these numbers -- which might as well have been written in disappearing ink -- you never would have known that.

All we heard from these news outlets and more was that the economy expanded at a 1.6% rate, below analysts' consensus of 2.2%.

And then we got an entire weekend's worth of worthless articles about what this means.

They are worthless because the originally reported numbers often don't hold.

Just about two months ago, in fact, we got a torrent of "The Economy Grew Faster Than Expected in the Second Quarter" articles, when GDP numbers were revised from 2.5% to a getting-robust 2.9%.

The fourth quarter of 2005 was originally reported at 1.1%.

Guess what? Faster than you can say "fifty-percent-upward-revision," it settled at 1.6%.

My bad, said the Commerce Department ... and this happens all the time.

In the fourth quarter of 2004, we saw a revision take growth from a guess of 3.1% to a real 3.8. Yikes.

So why, pray tell,

why

do the business media insist on reporting these original numbers as fact, drawing an undocumentable number of actual conclusions and rarely adding reader warnings that these numbers -- and the conclusions that follow -- should

not

be considered bedrock truths?

Often these premature conclusions will turn investors too negative, but sometimes they fool them into being too positive.

Look at this lead from

Reuters

on the most recent data:

A slumping housing sector helped slow U.S. economic growth in the third quarter to its weakest pace in over three years, leading financial markets to raise bets on interest-rate cuts next year.

We'll see about that "slowest growth in three years" thing. And in any case, these numbers are not great.

But I'll tell you what: On the off chance that they remain at 1.6%, well, yeah, the

Fed

might lower rates.

There is, however, a far better chance that the numbers will get bumped up closer to the 2.2% that was expected.

Then what? Well, a lot of business journalists have egg on their faces over the same old issue

and

rates won't be going down anytime soon.

While you can skip over Abelson if you haven't already,

Barron's

does

point out

some heavy insider selling in

Harley-Davidson

(HOG) - Get Report

.

And since we are on the manly subjects of motorcycles and selling to the greater fool, let's revisit the online gambling companies that the business media -- and investors -- left for dead since President Bush signed legislation that seemed to permanently ban online gambling in the U.S.

The Business Press Maven, who knows that a cumbersome, unwanted regulation has yet to be invented that could not ultimately be surmounted, implored investors to watch for some action, some dastardly way around the legislation, to develop.

Readers have written in plenty of suggestions, so I know the wheels of innovation are turning, at least among degenerate gamblers.

This morning, the

Telegraph

reports

that

888

, one temporarily eviscerated online gambling company, has been in merger talks with several firms, including

PartyGaming

.

And though

Wal-Mart

(WMT) - Get Report

is not facing challenges on par with those of online gamblers, its recent numbers put the company in a k-nasty knot.

Thankfully, I haven't seen what is becoming an irresistible reflex when a company hits trouble these days: published reports that management is considering a leveraged buyout.

Women's Wear Daily

does say

that Wal-Mart is considering smaller store sizes and other new formats -- something, anything to excite customers.

(Selling accurate reports on GDP would excite this shopper.)

And let's end today with a

wiggy article

by

The Wall Street Journal

that, as is typical, gives a corporate boss undue credit.

This sort of thing hurts investors because it leads to higher CEO salaries, the biggest waste of shareholder money ever invented.

It also gives investors unwarranted confidence that a CEO can navigate the future.

Too often, CEOs are in the saddle of circumstance, holding on for dear life. The

Journal

starts by noting that

Time Warner

(TWX)

boss Richard Parsons, formerly on the ropes, has been given a reprieve by a rising stock price.

"Time Warner has gained 25% since mid-August," the paper intones. "The question now is whether Mr. Parsons can sustain the momentum."

Can you really sustain momentum you had little role in starting?

The names

Comcast

(CMCSA) - Get Report

and

Cablevision

(CVC)

are not mentioned in the article but, uh, they've done similarly well.

In fact, since mid-August, give or take a few percentage points, they're up exactly the same amount as Time Warner.

"While he has not enunciated any new plans," notes the

Journal

, "there has been ample speculation."

The Business Press Maven speculates that Parsons' plan is to keep his fingers crossed that business will be good for the big cable companies and that there might be all sorts of takeover rumors out there to buoy the stock.

A journalist with a background on Wall Street, Marek Fuchs has written the County Lines column for The New York Times for the past five years. He also contributes regular breaking news and feature stories to many of the paper's other sections, including Metro, National and Sports. Fuchs was the editor-in-chief of Fertilemind.net, a financial Web site twice named "Best of the Web" by Forbes Magazine. He was also a stockbroker with Shearson Lehman Brothers in Manhattan and a money manager. He is currently writing a chapter for a book coming out in early 2007 on a really embarrassing subject. He lives in a loud house with three children.