Monday, December 1, 2008

The Nightmare Before Christmas

Here is my newest article.

Please forgive the sensationalist headline, the opportunity was too good to pass up.

The "actual" results were not as bad as predicted. Spending was 3% higher this year over last. The estimate called for a 1% decline. So, obviously, things are better than they seem.

As a expatriate of Las Vegas (and more importantly as a practitioner of statistics and a strong believer of Bayesian probability) I know enough to never bet against the American Consumer.

It is a little surprising to me then, since I automatically assume that everyone is as concerned with the minutiea of every bit of economic news as much as I am, that the stock market took a huge dump today.

My reasoning is this: If consumer spending makes up the majority of GDP, and Black Friday is the most important spending day of the year, if the results are better than predicted then stocks should be valued at a higher rate. Since, theoretically, the bind we are in is not the worse possible state of affairs.

Granted, consumer spending on the day after Christmas is a barometer reading and not a prediction, since the majority of spending is still yet to come. Also, one should not get into the habit of making stock market predictions, especially in the short run. At least one should not if he wishes to remain credible in the eyes of a thinking society, as applying a ration model of behavior to an irrational voting machine is absurd.

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