Statistics

Pfäffikon SZ, Switzerland – Many feel and know that something is very wrong with the world economy, but they cannot gain insights. Various macro data look slicked, but the pocket of citizens remain an echo chamber, not to mention the promised carefree retirement. A growing sense of impending doom contributes to the erosion of confidence in our central bankers. How did it come this far?

Feasible
In general, macroeconomists believe that the economy is feasible. Maybe John Maynard Keynes was the first who introduced this thought. In recent years, many market researchers think that our computers can help by interpreting data. In this, statistics form the basis. It was the British statesman George Canning, who described it as follows more than 200 years ago: “I can prove anything by statistics except the truth.” And with this statement, Canning summed up the issue very neatly. Statistics are the chameleons of the financial world and are used at any time in the most beautiful color.

Misconception
The ideas that many mathematical analysts can predict the economy using computer models based on statistics is a misconception. Not only as a source statistics are highly unreliable; the economy is certainly not natural science. Many smart people cudgel their brains about all kinds of statistics, where the collapse of Long-Term Capital Management appeals most to the imagination. Various financial parameters stretch increasingly in a scope that no one thought possible. All of this, whether or not, fueled by the modern poisoners, the central bankers.

Optimised
Governments and politicians benefit from an optimum presentation of statistics. And if the government publishes statistics, the majority believes that these statistics reflect an accurate, and reliable image. Nothing is, unfortunately, less true. Statistics consistently sketch a rosy picture colored by the publicist. An economy never presents itself as a static collection box because it is constantly changing. Meanwhile, the demographic gorilla ensures that no one can tell how the economy will evolve over time.

The basis is simply the company in which you invest or work. The daily calculation of the entrepreneur is the difference between production costs and selling price. Based on these facts, the entrepreneur negotiates, i.e. determines, the cost of financing. In this case, the interest rate correlates with the price level, the inflation is not. Monetary-makers, however, are trying to convince you using statistics that this correlation does not exist, and currently is even reversed. There are countless examples of statistics intending a soothing effect, instead of the truth.

It remains for me to wish you a good weekend.


Jan Dwarshuis is a senior asset manager at Thirteen Asset Management AG, where he is responsible for the Thirteen Diversified Fund. Dwarshuis writes his columns in a personal capacity and is not paid for them. Nor is he paying for his columns to be placed. Professionally, he holds positions in major European, American and Russian stock funds. The information in his columns is not intended as professional investment advice or a recommendation to make certain investments. At the time of writing, he has no position in the above mentioned shares and has no intention of doing so in the next 72 hours.