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Safest Bet for Investors: Don't Trust Any Economic Data

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By Friday, 11 January 2019 09:50 AM Current | Bio | Archive

Japan Comments on Brexit and has Pension Problems

Japanese Prime Minister Abe has urged the UK to leave the European Union with a deal and used the importance of Japanese manufacturing companies’ operations in the UK to validate his comments on UK domestic politics, the BBC reported.

Meanwhile, Japan’s government has admitted that it has underestimated wage growth in the official data in Japan recently, the Asahi Shimbun reported.

This really matters because pension payments, amongst other things, are linked to wage growth and the failure to produce reliable data means that pensioners received less pension money than they should have received.

About 20 million beneficiaries have been shortchanged 56.75 billion yen or about $525 million in insurance benefits, including unemployment and worker's compensation, due to a faulty government survey, the labor ministry said in its review report today, January 11.

This may also damage investors’ trust in the quality of Japanese data, although that does suppose that there was investor trust in the quality of Japanese data in the first place.

Unfortunately, the general rule, anywhere in the world these days, is that economic numbers are not to be trusted.

Just Another Brick in the Wall

The U.S. government remains shut down while President Trump has renewed his threat to declare a national emergency to fund the construction of a wall on the Mexican border.

By the way, if the U.S. government doesn’t reopen tomorrow, Saturday, it will become the longest shutdown in U.S. history, the New York Times reported.

Anyway, yesterday I got the impression that President Donald Trump was in Texas to start building support for his border security project rather than anything physical.

For investors, this is still about what this says about the next 2 years of possible gridlock in Washington rather than the economics about what this means today.

Fed Officials Comment on the Shutdown, Patience and the Balance Sheet Runoff

Speaking yesterday at the Economic Club in Washington, and as reported in the Los Angeles Times, Fed Chair Powell gave a couple of remarks that are for investors, at least in my opinion, worth taking note of: “If we have an extended shutdown, I do think that would show up in the data pretty clearly … If government shutdowns don’t last very long, they have typically not left much of a mark on the economy … There’s plenty of personal hardship that people undergo, but the aggregate level of the economy generally doesn’t reflect much damage … We would have a less clear picture into the economy if it were to go on much longer … It’s the strongest growth we’ve had in more than a decade. We see continued momentum from the data right through the beginning of this year.”

In simple words, all this is very obvious because the way that the economy operates today, it does really require the government to function at least some of the time.

Besides all that, the general message of Zen-like patience was again reiterated from the Fed chair and Fed speakers yesterday.

One could say, that the number of Fed officials adopting a metaphorical lotus position and preaching calm is almost overwhelming.

The Fed Chair also suggested yesterday that the balance sheet runoff won’t end in the near future and will be will be reduced significantly from where it is now, which of course traders won’t like, CNBC reported.

Etienne "Hans" Parisis is a bank economist who has advised investors on financial markets and international investments.

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Unfortunately, the general rule, anywhere in the world these days, is that economic numbers are not to be trusted.
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Friday, 11 January 2019 09:50 AM
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