New highs or new lows

Was away in India for ten days and then had to catch up with deadlines on return. There were some good reads.

The S&P 500 stock index had hit new highs in the two weeks of break from blogging that this blogger had to take. I have always cited John Hussman in my blog. For a change, let me cite another blog that I always want to catch up with, in response to this stock index making new highs. That is Cyniconomics. This blog post shows why investors are acting dumb, even though they think that they are responding rationally to easy money.  If I may add, readers should be pleased to note that debit balances in margin accounts held with NYSE Brokers/Dealers as a percentage of NYSE market capitalisation had exceeded the previous high of 2.59% at the end of January 2014. It stood at 2.65%. See chart.

One of my friends told me how impressive it is that the United States has brought down its budget and current account deficits. True, on the face of it, it is impressive. But, like in the case of many other countries, creative accounting has a lot to do with it. That does not excuse other countries replicating such a behaviour. But, it reminds us – observers/investors – that countries throw stones at others from glasshouses for point-scoring, just as what the West is doing with Russia, for example, while engaging in similar or more despicable behaviour.

The bloggers at Cyniconomics point out that the Congressional Budget Office (CBO) removed the ‘alternative scenario’ from their budget deficit projections:

Consider that Poole favored the “alternative scenario” that can sometimes be found deep within CBO reports and spreadsheets. This scenario corrects for at least a few of the absurd assumptions in the primary budget projections (the “baseline scenario”) that receive 99% of the media’s attention. Poole called the alternative scenario “the only truly honest and useful effort in town.”

Alas, the alternative scenario is no more – the CBO removed it from their annual outlook. Taxpayers can no longer find meaningful budget projections anywhere in the CBO’s work. [Link]

We should remember that the original ‘unemployment rate’ has now become the U6 unemployment rate – the so-called alternative measure of labour under-utilisation. That is quite a mouthful. People do not talk about it. They only talk about the headline unemployment rate. That is how governments/politicians shape/influence public discourse/narrative to their advantage. We do not realise we are being gamed.

The removal of the ‘alternative scenario’ by CBO also reminds one of how Singapore removed the table on Indigenous GDP (GDP that accrues to local population after excluding repatriated profits and remittances and after adding back profits and remittances repatriated to Singapore) from its annual Statistics Yearbook, after 2011.

That no government is free of the temptation to ‘massage’ public spending and budget deficit figures in many ways, including making rosier assumptions for future economic growth should help us place the Indian government’s budget deficit management or China’s economic growth ‘management’ in perspective.

No, this blogger is not condoning them but is only making the point that criticisms of such practices coming from the West carry no moral authority. They may be merely serving their own geopolitical goals in doing so.

[Postscript: The article by William Poole, critical of US budget deficit projections, published in the Wall Street Journal and cited by Cyniconomics, can be found here. OF course, there is some confusion. Mr. Poole refers to ‘Alternate Budget Scenario’. The bloggers in Cynicoomics say that the CBO has removed that exercise from their annual budget projection released in February. ‘Search and Find’ in the PDF document also could not locate the word, ‘Alternate’ in the CBO budget document]


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