Data Manipulation ? Central Banks, Buying Equity, Buying Bonds And Their Profits

“Gross domestic product fell at a 2.9 percent annualized rate, more than forecast and the worst reading since the same three months in 2009, after a previously reported 1 percent drop, the Commerce Department said today in Washington. It marked the biggest downward revision from the agency’s second GDP estimate since records began in 1976. The revision reflected
a slowdown in health care spending.” http://www.bloomberg.com/news/2014-06-25/economy-in-u-s-shrank-in-first-quarter-by-most-in-five-years.html

Maybe its time for the FOMC to have a GDP target too, besides the employment and the inflation target ? Just to round things up. And perhaps, throw in a stock market target ?

We cannot say the Fed’s policies are not working because the US Commerce Department gave a shoddy 2nd forecast for the GDP and thus had to revise it much lower for the 3rd time.

Data manipulation is probably not a new concept especially if China is concerned. But et tu, US ? Naah.

Data compromise is a taboo topic as far as HFTtrading is concerned and that it was possible to subscribe to data that comes a few seconds earlier than for the rest of the world.

It was also highly profitable for the Australian chaps who colluded to make a neat bundle off data although it had nothing to do with the HFT model.

“An Australian Bureau of Statistics staffer and a NAB employee have been arrested on insider trading and corruption charges over allegations they made $7 million by trading on market sensitive information on the Australian dollar.” http://www.smh.com.au/business/markets/abs-and-nab-employees-charged-with-insider-trading-20140509-3809o.html#ixzz31CQrbUyt

My reasoning is that we should be looking for buy opportunities now because the FOMC’s 2014 GDP growth forecast last week was 2.1-2.3%, which means that the next 3 quarters of GDP numbers are only going to race to make up for the anemic Q1 numbers.

It makes sense and I suspect the market consensus is such because the stock markets rallied last night.

And it makes more sense if you are trying to peddle a recovery story that you should heap up the bad numbers behind you so that the forward numbers will look better.

To top the cake, there is no one to audit or investigate the official data unlike the case of private data providers like the ISM which was caught making a huge mistake earlier this month, roiling the markets for a couple of hours. http://www.businessinsider.sg/the-dust-has-settled-and-heres-the-deal-with-the-ism-manufacturing-index-2014-6/#.U6up4LHb5X8

Adding to the portrait of the conflicts of interests, central banks and governments are more involved in markets than ever before, now buying equity for their portfolios besides holding on to record amounts of foreign exchange and bonds, all of which will have a P&L impact which is usually reported annually.  http://www.bloomberg.com/news/2013-04-24/central-banks-load-up-on-equities-as-low-rates-kill-bond-yields.html

“The Federal Reserve sent about $77.7 billion in profits to the Treasury Department in 2013 …. In 2012, the Fed sent a record $88.4 billion to Treasury coffers”  http://blogs.wsj.com/economics/2014/01/10/fed-sent-77-7-billion-in-profits-to-treasury-last-year/

Profits are good because losses are….. bad. And thus, central banks have a P&L responsibility too.

“China’s CIC Under Fire After Overseas Losses” : FT 18 June 2014

I have heard a friend mention how easy it would be for a country to avert technical recessions sometimes if data is just brought forward, for instance, if huge aerospace or shipping orders are recognised in different accounting periods. A wild theory, of course.

The heat is on banks right now. Today Barclays under scrutiny for their dark pool trading activities which is disappointing because I always thought they had such a state of the art system reserved for top clients that revealed market depth (which now turns out to be falsified). http://dealbook.nytimes.com/2014/06/25/n-y-attorney-general-to-accuse-barclays-of-fraud-over-dark-pools/?_php=true&_type=blogs&_r=0

Nothing (not even a disaster GDP number) can shock the markets anymore these days as we hear clearing houses are next in line and even the ECB admits, human behaviour is the problem as far as money is concerned.

And thus, I am putting this GDP fiasco behind and waiting for the next Fed speech.