NFP and the epidemic that has plagued finance.

People seem to get data wrong, they assume it happens in a vacuum.  They confuse causation with correlation.  They discount living through the experience. It is the difference between watching the movie and reading the critique.  As a market participant your goal is to determine what the market thinks is most important and apply risk management to it.  A chart records but rarely if ever tells the whole story.

So the lastest blogsphere spat is being Mr. Ritholtz and Mr. Zerohedge on NFP.  I respectively say, they are both wrong.  That is what is great about data, you can make it say anything.  Even data is not black and white, it rarely shows what is the most important factor.  It still needs to be extrapolated.  It is a great way to reveal a bias, if you have one.

They are both wrong because they are trying to tie the old way with new data.  The most important part of the data is that they changed the way it is calculated.  It is like predicting the way the game is going to end by the first play.  Stay patient grasshoppers.  We just kicked off.  I understand you can adjust it and make calculations but it is hard to tell what it means to the people.

This is an epidemic that has plagued finance; looking at data that has changed, the same way.  If I am wrong, I will gladly admit it.  I am not an expert on NFP, not worth it for how I trade.  What I am good at is looking at data and formulating both sides. Mr. Ritholtz has put together a strong and logical argument and if more people believe it, it will come true.  I just have a hard time believing that the current market participants care or will find it important and that that the same way it has been critiqued in the past is the best way now.

I believe the goal of the indexes is to attract the most participants. That means higher prices.  The cheapest way and best story is to move the broader market through the NASDAQ. If it gets stuffed and no other index takes leadership I will change my thesis.

Link to Mr. Ritholtz well articulated argument: http://www.ritholtz.com/blog/2012/02/a-few-thoughts-on-the-employment-situation/

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