Fake News

Muslim Media Network

Fake News

By Bob Wood, Muslim Media News Service (MMNS)

In today’s America, we have access to news programming virtually 24 hours a day. So there is obviously no shortage of information for us to take in when trying to learn about what’s going on in the world. Some find it strange that so many younger people here say that they get their news from The Daily Show with Jon Stewart. And no one laughs at that any harder than Jon Stewart himself.

What Jon tries vainly to tell us is that his is not really a news show at all, but is more of a fake news show, pretending to do serious news but mostly merging real news with satire and sarcasm to get the end product. As Stewart has felt the need to remind us in the past, the show that comes on before his on Comedy Central features puppets making crank phone calls.

But fake news or not, that’s where so many younger viewers go for what they feel is real news not available anywhere else. And spending as much time as I do watching what passes for serious news, I can readily see their point!

For investors, there is also plenty of fake news. The problem is that the sources of fake financial news want us to think they are bringing us the real thing. ‘Serious’ financial media outlets like CNBC and the Fox Business Block purport to educate viewers on what is going on and how to profit from recent developments–but for the most part, there is little or nothing coming from those sources that holds any value at all.

The biggest problem is that so much of the news repeated in the financial media is taken from government sources, which may now be putting out more false information than anyone would believe if they didn’t know better. Instead of taking steps to verify or validate government news releases, they are simply taken at face value and repeated endlessly.

An excellent case in point are the new jobs numbers announced this morning (6-1), announced at 157,000 new jobs generated by our “just right” economy in May. The only problem with this number is that it isn’t true! In fact, it’s not anywhere close to being true!

At the BLS, where those job creation numbers are tallied each month, they also issue revisions to their reports at a later date in an effort to improve accuracy. One of those reports is called the Business Employment Dynamics report, and thanks to Barrons and the folks at The Liscio Report for bringing this to our attention.

According to the initial job creation news releases, there were 507,000 new jobs created in the private sector in the third quarter of 2006. The BED report was just released and showed that after time had allowed for some clarity to those initial reports, that job creation number was reduced and only 108,000 new jobs were created in that three month period.

Of course, this was released long after the people on CNBC and traditional media sources had repeated the higher jobs numbers ad infinitum, and well after investors had acted upon those numbers.

It turns out that the discrepancy was credited to the BLS’ use of a statistical model called ‘’the birth/death model’’ where failed businesses are assumed to have been replaced by new ones and those who lost jobs at the failed companies must have found new jobs at newly created ones. Those jobs were assumed to have been created since they were not actually identified and counted in time for the jobs report issued on the first Friday of every month.

One problem, of course, is that investors had acted upon the much higher numbers and most of those investors never hear about the big downward revisions issued months later. Oh, and of those 157,000 new jobs announced this morning, which is generating calls on CNBC that the economy is in a “sweet spot,” 203,000 of those jobs were not actually identified and counted, but merely assumed in using the birth/death gimmick. No, I didn’t transpose those numbers.

Here’s another piece of fake news to keep in mind when you hear mention of it again soon. It has to do with what a great job the Bush administration is doing with their economic policies. Now, on the face of it, that should look rather strange. The idea that the Bush troupe can do anything right should alert you to something fishy going on when the truth is later revealed.

But they now tell us that the Federal budget deficit for 2007 will shrink to only about $200 billion, another sure sign that their disastrous tax cuts actually worked. This past week, USA

Today reported on analysis done by them that shows that last year’s deficit, reported by the Bush team at only $248 billion was actually closer to $1.3 trillion if proper accounting methods were used.

You know, like if they included the costs of the wars and other expenses, and how they spend the surplus Social Security contributions sent in by workers every year.

Also left out was how obligations for future Social Security and Medicare payments are increasing annually but are not counted until the government actually has to write the checks, allowing some future president to have to announce huge deficits not of his own making.

The fake news gets even funnier than bits on The Daily Show when you learn how the government compiles data that result in inflation figures, especially as to the “core rate” of inflation. Of course there is almost no inflation to be found at the “core” rate, since virtually everything that is rising quickly in price today is simply excluded from the calculations!

The most obvious flaw in this number is that food and energy are not counted, dismissed as being “too volatile” to be reliably used. Okay, on the face of it, that sounds right. But if something like food and energy costs are steadily rising year after year, they are no longer volatile; they are in a strong trend upwards!

Of course, when lower inflation is assumed, GDP growth is magnified. So one bad number begets another, and the fake news crews in the financial media offer them as proof that our economy is strong and growing at a steady pace, with little inflationary concerns to get in the way.

The chairman of the Federal Reserve has gotten into the fake news business lately too. He recently told us that the housing market was nearing a bottom and should recover soon.

A small chorus of sorts was formed when he was joined by Hank Paulson, our Treasury Secretary. Now if anyone had good data on the housing market and was in a position to know we were close to a bottom, it would be those two, right?

Someone with better information is Robert Toll, of Toll Brothers, one of the nations’ largest home builders. He seemed confused at what he had been hearing from those two housing optimists.

“I was taken by surprise when the secretary of the Treasury said that the hard times were behind us…I wondered where he got that information. The bad times are not behind us yet.”

Now how is that for conflicting information? Of course, the first thing we should do is ask why anyone might have a reason to lie about the state of the housing market. If anyone had a reason to paint a rosier picture than reality agrees with, I would think the CEO of a home builder would be at the top of the list.

But then, the Fed chairman and the Treasury Secretary are aligned with all the other fake news too on job creation, inflation, GDP growth and other economic data. Now, why on earth might they feel the need to lie? One reason might be that if economic policies sold to us as being in our best interests turned out to be anything but, saving face and keeping their jobs– not to mention Republican control of the White House–might be a factor.

A very good book helps explain a lot of what is being passed off today as real news, only to be strongly disproved later when few are watching. Get a copy of Peter Schiff’s recent book, Crash Proof, for a primer on how the government spins bad economic numbers into good ones, and why they do that.

For extra credit, make it a habit to go to the BLS’ web site every month and read past the headline numbers announced breathlessly on CNBC. If you are going to make investing decisions based on economic data, so much the better if you rely on real news, and not the fake news so prevalent in the advertised government data which is then repeated in the media.

And check out The Daily Show. When it comes to fake news, nothing else comes close!

Have a great week.

Bob Wood ChFC, CLU Yusuf Kadiwala. Registered Investment Advisors, KMA, Inc., invest@muslimobserver.com.


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