Real or not real?... the GDP, rumors regarding Steve Jobs' health, peak oil? Thoughts on what's true and what's not, courtesy of Jason Schwarz, at Lone Peak Asset Management (posted at Seeking Alpha). - Ilene
What is real? Up until this point, 2008 has been a year marred by false data. The market has had no trouble digesting the real numbers. It's the false numbers that have put us into a recession-like sell off. The list of market moving inaccuracies continues to grow, here are the three latest:
1. Government GDP Report. Why doesn't the government just hold off a few weeks before releasing its reports? No data is better than false data. The latest GDP growth revision is absolutely inexcusable. I can handle a small revision from 3.1% to 3.2% but 1.9% to 3.3%? Wouldn't it be better to just wait another 3 or 4 weeks and get the numbers correct?
This isn't the first time either. The non farm payroll reports have provided us with some overreactions. The carnage of 2008 actually began on January 4th when the December payroll number was released. It came out at 18k and the Dow sold off over 800 points in ten days. Nobody paid much attention when that number was later revised up. We've lost too much market value because of seemingly negative data that was later revised. Our estimates show that such inaccuracies have cost the Dow over 1500 points.
2. The Steve Jobs Obituary. False rumors haven't been limited to the financials, Nasdaq leader Apple (AAPL) has dealt with its fair share of false rumors as well. The latest cheap shot bear tactic happened on Wednesday evening with the release of a 17-page Steve Jobs obituary over at Bloomberg. We calculate that Apple has lost approximately $30 in share price due to false rumors regarding the health of its CEO.
3. The Misinformation on Oil. Talk about getting creative, try being an oil bull for a day. We have heard lie after lie come from this group as they try to justify the ramp in crude prices. My favorite was the Nigerian oil crisis. Come on. They try to say whatever they can come up with to take the focus away from the real data. The bottom line is that this planet is flush with oil and even if it wasn't, we will have alternative technologies for transportation and energy fully integrated into society within twenty years. Cars will run on natural gas, hydrogen, and electricity. Energy will come from solar, wind, geothermal, or nuclear. Take your pick.
The other fallacy among oil bulls is that the growing middle class of India and China will cause a world wide shortage. I'd encourage you to research one of the main concerns presented to international leaders at the World Economic Forum in Davos, Switzerland. Their real concern is just the opposite - they are actually more concerned with decelerating population growth. Germany, Italy, Spain, France, Japan and Russia are losing drivers every year. By 2030 there will be 80 million fewer Europeans than there are today. Japan will lose 60 million people. Russia 30 million. We calculate that oil is overvalued by at least $65 a barrel because of false supply issues spread by investment speculators.
The US economy has been amazingly resilient in the face of these volatile headwinds. Inaccurate data moves the markets in the short term but over time, the market will overcome its panic and focus on real data. With all the negativity that has been thrown around this year the truth actually sounds like a lie. We have GDP growth at 3.3%, unemployment is still in the 5% range despite a housing meltdown, Apple can't produce enough iPhones to sell, and corporate earnings (excluding financials) have held up remarkably well. These positives will get priced in as the panic continues to subside.
DISCLOSURE: LONG AAPL, SHORT USO.