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To: Paul Shread who wrote (48261)	7/31/2002 9:15:27 AM
From: The Freep	Read Replies (3) \| Respond to of 209892

Freepbriefing.com says you guys are alarmists. 2001 GDP was only revised down 75%. That's nothing among friends. And we're all friends here, right? I mean, after everything the GDP has done for YOU, it's pretty shortsighted to worry about the past now. Nothing to see here. . . move along. We here at FB.com are more interested to see how foreign markets react to this revision stuff. . . of IF they do. the freep, editor in chief

To: Paul Shread who wrote (48261)	7/31/2002 9:48:29 PM
From: Gamma Positive	Respond to of 209892

Briefing.com Stock Brief ___________________________________________________________________________ Updated: 31-Jul-02 Economic Silliness [BRIEFING.COM - Gregory A. Jones] Briefing.com is biased. We have a bias toward interpreting economic reports in their historical context. Guilty as charged. With just about every comment analyzing an economic report on In Play, we hear from many readers who think that we're biased and should not be. Sometimes we're too bearish; lately the accusation is that we're too bullish on the economy. We do not mind the accusation of bias per se. Many critics seem to be saying nothing more than that we provide an opinion along with the numbers, and indeed we do. We're in business to provide opinion. Seeking Truth Rather Than Math But at the same time, the criticisms belie a misunderstanding of how to use economic reports. To someone who has never watched economic reports before, a 5.0% GDP growth rate in Q1 looks fantastic - happy days are here again! Then the 1.1% Q2 growth rate looks like recession is on the doorstep. No doubt those with a penchant for market volatility like to see it that way. In our analysis, however, we're not looking to hype any economic number - we're simply looking for its true meaning, and pointing out any market overreaction. In Q1, our In Play comments pointed out that the huge 5.8% GDP increase (since revised lower to 5.0%) clearly overstated the strength of the economy and that the recovery would be sluggish. With today's 1.1% growth rate, we suggested simply that the report was consistent with our view that the recovery was indeed sluggish, and that a double dip recession still looked unlikely. Instead of getting overly optimistic after the Q1 data, we continued to highlight our belief that the recovery would be uneven due to slow business investment growth. In Q2, business investment was nearly flat after several quarters of sharp declines. This provided us reason for optimism that the story was unfolding no worse than we had expected, and perhaps a bit better. It's All About Perspective We recount our analysis of these recent GDP reports so that readers can understand our approach to analyzing any economic report. We always note how the number compared to the consensus estimate. But that comparison is worthless without some perspective. For example, we would not consider a Durable Orders report that is a two percentage points off the consensus estimate to be much of a surprise, while a Retail Sales report that missed the consensus by that much would be shocking. Every economic report reveals information about a different piece of the economy, has different survey sizes, and different propensities toward volatility and revisions. When we downplay an economic report even though it has missed estimates by quite a bit, it is due to a consideration of these factors. Some reports just aren't that useful and we'll always downplay them regardless of the outcome; some are critical to the outlook and even a small departure from estimates can lead to a reassessment of the economic outlook. If we dismiss one report and react strongly to another, it's not because one was weak and the other strong; it's because one wasn't meaningful to the outlook and the other was. Ultimately, we don't want to be bullish or bearish, we just want to be right. That's our bias. What To Watch In future Stock Briefs, we'll try to dig deeper into the specifics of individual economic reports to give readers a sense of the importance of each and how they should be interpreted. As a teaser, here's a look at how we view the importance of various economic reports, ranked by tiers, with 1s being the most important and 5s the least. This list will change as economic conditions change, but this is a good reflection of what reports are the most important to watch at present. Tier Report 1 Retail Sales 1 ISM Index 1 Employment Report 2 Housing Starts 2 Durable Goods Orders 2 Existing Home Sales 2 New Home Sales 2 Industrial Production 2 Personal Consumption 2 Personal Income 3 GDP 3 Productivity 3 Chicago PMI 3 Philadelphia Fed 3 Jobless Claims 3 ISM Services 3 Auto Sales 3 Construction Spending 3 Consumer Confidence 3 Michigan Consumer Sentiment 4 Factory Orders 4 Business Inventories 4 Trade Balance 4 Employment Cost Index 4 CPI 4 PPI 5 Leading Indicators 5 Wholesale Sales 5 Consumer Credit 5 Treasury Budget Parting Shot * Media Silliness: CNBC's Maria Bartiromo went on the offensive against the Treasury Dept's Richard Clarida yesterday, suggesting that the downward revisions to the Census Dept's GDP figures for 2001 and Q1 2002 were akin to the accounting frauds at companies such as Enron and Worldcom. The analogy might work if the Treasury had misstated its own accounts, but the GDP numbers are an attempt to measure the entire US economy, not one company's financial statement. The Census Dept is very clear that the preliminary estimates are based on limited data, and even tells anyone who bothers to read the report how large the revisions typically are. In the post-Enron world, the media fancies itself as the world's financial policemen; too bad they don't understand what constitutes a crime. Greg Jones - gjones@briefing.com