The Fallacy Of Year Over Year

There is an endless drumbeat in the media about the one year anniversary of the market low. This is also the one year anniversary of the low in the economy. Year over year numbers are going to start looking a lot better. This is largely a statistical anomaly and in reality has little significance. The measuring stick has simply been shortened. If I measure myself in kilograms instead of pounds that doesn't mean my diet has been successful.

Charles Biderman of Trim Tabs has been highly critical of the government and economy because he was tracking tax withholding receipts and thought the government was underestimating the job losses. He has now turned bullish on the economy because year over year withholdings in January were flat. His measuring stick has simply become shorter.

Over the coming months we will see economic figures that appear robust while people on Main Street will be scratching their heads. By the second half of the year stimulus will be a net negative and comps will get a lot tougher. I believe this market will make an enduring top this Spring as investors will be dazzled with great year over year comparisons. That will set the trap.

1 comment:

Onlooker said...

You're telling me that Mr. Conspiracy Theory is now bullish? Wow, I didn't see that one coming.