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View Diary: The Swan is still Black, and We're Still Screwed (212 comments)

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  •  Ilargi (11+ / 0-)

    Well, thanks for the compliment.

    My own favorite quote comes from Barry Ritholtz who yesterday gutted the literally mind-bending prevailing interpretation of the housing numbers. Here's the essence of it:

    Yet another set of odd and misleading coverage on Housing Starts.

    BUILDING PERMITS: Privately-owned housing units authorized by building permits in June were at a seasonally adjusted annual rate of 563,000. This is 8.7% (±3.0%) above (revised) May rate, but is 52.0% (±3.6%) below the June 2008.

    HOUSING STARTS: Privately-owned housing starts in June were at a seasonally adjusted annual rate of 582,000. This is 3.6% (±11.3%)* above the revised May estimate but is 46.0% (±4.3%) below the June 2008.

    What can we tell from this data?

    Nothing about monthly change in Starts (data points less than the margin of error are not statistically significant); We can say that permits were up month to month, although how much of that is seasonal is hard to decipher.

    The year-over-year data is much clearer:

    New Starts down 46%, Permits down 52%.

    Incidentally, much of the media reportage on this was simply innumerate — the numerical equivalent of illiteracy. Not just a little wrong, but totally, embarrassingly incorrect.

    WSJ: “Housing starts increased 3.6% to a seasonally adjusted 582,000 annual rate compared to the prior month, the Commerce Department said Friday.”

    Bloomberg: Housing starts in the U.S. unexpectedly rose in June as construction of single-family dwellings jumped by the most since 2004, signaling the market is stabilizing. The 3.6 percent increase brought starts to an annual rate of 582,000.

    Marketwatch: Housing starts rose 3.6% to a seasonally adjusted annual rate of 582,000, the highest figure November.

    Reuters:   New housing starts and permits jumped more than expected in June, propelled by a rise in single-family homes, a government report showed on Friday. Housing starts climbed 3.6 percent to seasonally adjusted annual rate of 582,000 units, from May’s upwardly revised 562,000 units, the Commerce Department said.

    No, that is not what they said at all –  plus 3.6% with a margin of error of 11.3% = YOU DON”T KNOW.

    I know, this is a pet peeve of mine — but still,

    it makes you wonder if these people can count to 21 unless they are naked.

    Barry's right, and all the rest is just noise on the line. What I've read from bonddad recently is simply hugely embarrassing. Anyone who, to "make a point", resorts to quoting the blatant lies uttered by the likes of Larry Summers, should be put out on the curb with the rest of the trash.

    It's not just about a different interpretation of similar data, it's about connecting only the dots that please you. And that would be just fine by me if it were harmless. But it is not. It's not some theoretical exercise we're talking about.

    While these innumerates practice the lack of their skill-sets, in the real world of America 1,5 million foreclosure notices went out in the past 6 months. During that same period, some 3 million people lost their jobs. This affects real people, with real shattered dreams, and real worries about their childrens' future. They deserve far better than having their miseries and troubles belittled by a bunch of armchair hobbyists who happen to live downwind of rose-colored fumes.


    •  #! blogger Calculated Risk smacks down Ritholtz (0+ / 0-)

      for his stupidity that you have reposted:

      Clacluted Risk has said "It now appears that single family starts might have bottomed in January."

      A few quick points:

      # If single family housing starts bottomed in January, on a seasonally adjusted annual rate (SAAR) basis, the 12 month moving average of unadjusted data won't bottom until October or so (depending on the shape of the recovery). Using this method adds a lag to the analysis. # Barry also conflates calling a bottom in housing starts with: 1) "a bottom in Real Estate" and 2) "a snap back".


      Most people think prices when they hear the word "bottom", and the bottom for prices usually trails the bottom for housing starts - sometimes the two bottoms can happen years apart!

      Second, looking for a bottom in housing starts doesn't imply "a snap back" in activity. As I noted yesterday, "I expect starts to remain at fairly low levels for some time as the excess inventory is worked off."

      "When the going gets tough, the tough get 'too big to fail'."

      by New Deal democrat on Sat Jul 18, 2009 at 01:59:20 PM PDT

      [ Parent ]

      •  Barry Ritholtz is a moron (1+ / 0-)
        Recommended by:
        New Deal democrat

        He uses year over year comparisons when it suits his argument, bu the has no problem with month-to-month comparisons when it suits him.

      •  CR (3+ / 0-)
        Recommended by:
        Spatz, Stoneleigh, yellow dog in NJ

        CR unfortunately gets into semantics and then flies off into territory Ritholtz never addressed. Not a terribly convincing stance.

        Ritholtz, on purpose, doesn't distinguish between separate bottoms, and injecting them into the discussion makes no sense, at least not in reaction to the original statement:

        I cannot figure out why people continue to call for a bottom in Real Estate

        CR calls for two separate bottoms; calling for 5 or 10 would have been just as credible (it all depends on what you want to talk about), and just as much not a reaction to what Ritholtz says. It's just CR's pet theory. And he's entitled to those, but it's either disingenuous or simply not too smart to imply that Ritholtz wouldn't be able to tell the difference between housing starts and prices. He simply doesn't bring it up because it's irrelevant to his point.

        CR's main flaw in general, which takes nothing away from the quality of his analysis of past events, but does dent the credibility of his predictive powers considerably, is perfectly summed up in this line he uses:

        It now appears that single family starts might have bottomed in January.

        That is plain suggestive wishful thinking based on nothing but what the author would like to see in the data. It's obviously not supported by the Ritholtz graph he comments on, and whether there's a lagging indicator in play is, in that regard, pure semantics.

        Single family starts might have bottomed, and they just as much might not have. It has the same merit as the headline yesterday that read:

        US housing starts rise to 7-month high

        Looking at this Barron's graph of the starts, it's hard not to laugh at that interpretation of the numbers. It's not untrue, but it is a weird conclusion. June starts are a mere notch above those in January, while April looks at par with January. All in all not exactly a confidence booster. As Ritholtz rightfully states, a 3.6% rise in starts with an 11.3% margin of error means you don't know a single thing.

        June Housing Starts

        To call CR's piece a smackdown of Ritholtz's "stupidity" doesn't bode well for your analytical skills. There is no stupidity in what Ritholtz states, and if there's any smacking going on, it misses by a mile and a half. I won't call CR stupid; suffice it to say this is not one of his best posts.

        There is no hard evidence of a bottom (Ritholtz's one and only theme), and CR has none to provide; he's just wishfully hypothesizing about a different topic than Ritholtz and thereby unwittingly exposing a glaring weakness. You can't take people to task by randomly changing the subject. Which is what CR does. And what you take to the next level.

        Ilargi, The Automatic Earth

        •  CR just smacked down your points too (0+ / 0-)


          Ritholtz is stupid, using Year over Year negative (which oh by the way have been declining, but nowhere mentioned in BR's post) to completely miss a turning point that can only be seen by higher frequency data.

          But when a blogger's entire blog is wedded to Gloom and Doom, I guess you got to go with what you got.

          "When the going gets tough, the tough get 'too big to fail'."

          by New Deal democrat on Sat Jul 18, 2009 at 05:24:09 PM PDT

          [ Parent ]

          •  Gloom and Doom (0+ / 0-)

            And residential construction has lost jobs for several years, and even though construction employment will probably not increase significantly, not losing jobs will also seem like a positive.

            This removes drags from the economy - and that is the little bit of good news.

            To be clear, this is not great news for the homebuilders. It will take some time to work off all the excess inventory, so new home sales and single family housing starts will probably stay low for some time. And it is possible that new home sales and housing starts could still fall further.

            Sure can't imagine what in the post you link is gloomy.

          •  This is just a sucker rally (1+ / 0-)
            Recommended by:

            That turning point only reflects the temporary return of confidence of a sucker rally. We told people in early March that a rally was coming and would last for several months. We said that things would seem less awful for a while and that people would return to their complacency. That is exactly what has happened, but we are getting closer to a recovery high now, and that means a resumption of the decline is not far off. Just watch what happens to housing starts and everything once the markets begin to fall in earnest again.

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