Monday, August 14, 2006
Yield Curve, Decimals Going Up?, Econospinning
The article is by Burton Malkiel, who wrote the famous and excellent "Random Walk Down Wall Street," which is one of the best business and investment books... and best statistical analysis books... I've ever read. A new 9th edition will be published in January. Gosh, others must think it's pretty good, too!
Malkiel is not that worried about the inversion this time. I still am. He's a famous Princeton economist. I'm a part time economist with no discernable means of income. We're both bald guys. He has a famous book.
WSJ reports that the BLS is considering releasing the CPI with more decimal places
The issue is that people are using just the headline numbers and not working with the actual indices. If the change in the index one month is .251, that's getting rounded to .3, and if it's .249, it's getting rounded to .2, so if headline readers see .2 going to .3, it means to them that inflation is accelerating significantly. If you use the actual indices and do the calculation yourself, it's plain to see. Yet again, the most simple stuff can be a differentiator in your work compared to others. Details, details...
Good book-- its review is the subject of my upcoming WTT column this Friday. Econospinning by Barrons economist Gene Epstein. The first 11 chapters would be best suited for stat-geeks, but 12-17 and the afterword are for everyone. I highly recommend it. No popular news outlet or pundit is spared his sharp pen. You will have a far better understanding of what data "say" and "do not say," how to cut through media shallow reporting, and how to properly use data.