Massaging the numbers

I think we've all run across a case where data (qualitative or quantitative) was misrepresented to give a certain impression. Josh Brown put an anecdote in his blog post yesterday that I thought raised some really interesting points.



Anyway, when I was younger and reading his stuff, I was always very impressed at the sheer command he had of thousands of little tidbits and scraps of information with which he would construct the mosaic.

As I grew older, it occurred to me that he was just artlessly splattering paint on a canvas. Leaving out the stuff that didn’t fit and randomly including whatever bolstered his case.

He’d say technicals were nonsense, unless they lined up in accordance with his views – and then all of a sudden there would be a heavy emphasis on charts. He vacillate between valuation screeds and Federal Reserve doomery, drawing false analogies and non-sequitur comparisons. One minute he was a macroeconomist, the next minute he was taking deep dives into the balance sheets of consumer staple companies, and then somehow connecting the two things along to form an ironclad case for why everyone needed to buy or sell this or that thing. All the while keeping no scorecard whatsoever about how any of these mosaic updates from past weeks and months had played out.

This is more of an upper level question: Do you guys think that people will only consider an indicator to be relevant or true if it fits what they want to be true? This is a pretty open ended concept (some examples that come to mind are regarding politics and relationships), but applied to finance, I believe that it would definitely apply to Security Analysis, pitching a deal, etc. I think that in most cases, people just want to sell whatever they're selling, but I also think that it can be a psychological thing either based on their prior view/understanding of the thing or them wishing it to be true.

To be clear, I'm not posting this to try to shit on anyone (unless you're a talking head, then yes I am).

 

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Be excellent to each other, and party on, dudes.

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