Trying To Make Sense Of The Data

One of the frustrating things about the coronavirus is the lack of a meaningful context in which to make sense of the data.  Statistics are breathlessly reported by the news media without any way to assess what the statistics actually mean for those of us out in the world at large.  It’s a good way for news sites to increase their clicks and visits — the New York Times has reported that news sites have experienced significant usage surges, as readers seek the latest information about COVID-19 — but what’s the right takeaway from the flood of information?

article_24febbraio_2014Consider the reports about increases in the number of confirmed coronavirus cases in the U.S.  Are reports about the number of confirmed cases in a particular location doubling in a week, for example, bad news . . . or just a product of the fact that as tests become more available and more people are tested, we’re inevitably identifying more people who have the virus?  We know that many people who are infected with coronavirus experience only mild symptoms, and increased testing is going to identify an increasing number of those mild cases.  And, as we identify more people who are walking around with the virus, we’ll inevitably see a decline in the mortality rates, because we know from fifth-grade math that an increase in the denominator of confirmed cases, by adding in more newly discovered mild cases, will necessarily result in a decline in the overall death rate percentage.

And speaking of the mortality rate, is reporting on people who have had the coronavirus and died really a meaningful measure, in the abstract, or does it tell us something only if we know more about the circumstances of the deaths?  Take Italy, for example.  The reported mortality rates in Italy are among the worst in the world — worse, even, than the reported rates in China (and I emphasize “reported” for a reason).  But as this article from the Telegraph points out, the high Italian death rates appear to be the product of several factors that seem to undercut the ability to draw meaningful inferences from the Italian statistics.  For example, Italy has one of the oldest populations in the world, the  vast majority of the individuals who have died have been older and dealing with other health issues, and Italian doctors record coronavirus in the cause of death records even if the individuals were suffering from other, significant health problems that contributed to their death.  Given those factors, how should we react to Italian statistics?

And finally, I’ve seen reports that China has closed the hospitals it built to deal with its coronavirus cases, and is reporting a decline in coronavirus cases.  But, should we credit anything China has to say about COVID-19?  It’s pretty clear that China wasn’t exactly transparent with the world when the coronavirus was first discovered in Wuhan province, and I’m skeptical about trusting anything that government says about COVID-19 at this point.

The need to put some context to the data is important not only for those of us who are scratching their heads about how to deal with the issues presented by the coronavirus, but also for the decisionmakers who are weighing when to open businesses, schools, and restaurants.  Our daily lives always involve some form of risk calculation, and most of the risks — whether it is the risk of death in a traffic accident, from a choking incident, from a falling tree limb, or from an operation gone bad — are risks that we are willing to accept.  If the increased testing produces a surge in the number of reported cases and a correspondingly steep drop in the mortality rate, at what point do the authorities conclude that it is okay for us to leave our houses and go back to work?  If the death rate from COVID-19 is twice that, or four times that, of H1N1, and we compare that risk to the damage that would be done to the economy and to individuals who live paycheck to paycheck from a prolonged shutdown, do we accept that risk?

And finally, how do the publicized cases of sports and entertainment figures who report having the coronavirus affect the public perception of the risk equation?  If all of the NBA figures, football coaches, and movie and recording stars who have contracted COVID-19 survive the experience, will that put pressure on authorities to let us get on with our lives?

When you are talking about data, context is so important.  Mark Twain was right about lies, damn lies, and statistics.  I feel that the news media is letting us down, and focusing on the sensational, click-bait headlines while forgoing the nuts-and-bolts reporting that really would be useful during this period.

The Most Random Of The Random

In his influential 1973 book, A Random Walk Down Wall Street, Burton Malkiel posited the so-called “random walk” theory of markets.  The “random walk” theory contends  that the stock market efficiently incorporates all existing information and investor expectations into the current price of a particular stock.  That theory meant that past movements of a stock’s price couldn’t be used to predict its future movement — which would inevitably occur due to random movement and unexpected events.

gsed_0001_0016_0_img4111Investors, this week we seemingly saw the random walk world, in all of its utterly random glory!  Except this week, the “random walk” was more of a Frank Gallagheresque drunken stagger, as the market lurched drastically in one direction and then in another, with enormous one-day swings up followed by enormous one-day swings down.  The result is a stock price chart that looks like the oscillations of a radio wave or an indecipherable EKG readout.  And interestingly, for all of the thrashing about from one day to another, the bellwether Dow Jones Industrial Average ended the week up slightly from where it began.

What does it all mean, for those of us who have some part of our retirement savings in the stock market?  Should we listen to those who try to explain why the market is moving as it is on a particular day — while recognizing that you can find stock market analysts who will take virtually every position on the explanatory spectrum, and that most of the confident predictions about what the market is and will be doing turn out to be wrong?  Under the random walk theory, it’s not possible to predict what will happen to the stock indices on Monday, or by the end of next week, or during the next month.  Future events that are unknowable — like the process of collecting more information about the true nature and risks of the coronavirus, whether an effective vaccine is developed, and whether people continue to have panicky reactions to the coronavirus, or come to accept it and move on with their lives — will be determinative.

A significant part of investing, in my book, is acceptance — acceptance of what the market is, and also acceptance of what your role is.  Everyone I know who has tried to time the market, or made drastic decisions because of their conclusions about what would happen next, has paid an unfortunate price.  Small investors are never going to have better, or faster, information.  The best course in my view is to assess your own goals and recognize whether you are a long-term investor, or a short-termer.  If you’re a long-term investor, who isn’t going to be needing those invested retirement savings for years, where else are you going to put your money?  Put it under the mattress?

Those Little Routines

Over the years I’ve always used some kind of coin container.  When I was in college, I used a large glass jar as the repository for pocket change — until one day the glass broke from the accumulated weight of the coins, and I switched to a smaller jar.  I’ve also used metal cans.  Now I use a nice wooden box that Kish got me long ago.

But whether the container is glass, or metal, or wood, the concept is the same:  when you come home, you empty your pockets.  in my case, the house keys go on the top of the dresser, the cell phone gets set down on the cordless charger contraption, and any loose change goes into the coin box.  It’s one of the little organizing principles that many of us use to order our lives and establish our small, personal routines.  Those little routines can add comforting structure to your day, and also mean you don’t have to go tearing the house apart looking for your keys and phone and glasses every morning.

Years ago, the change containers used to fill up a lot more quickly, because I would always pay for my lunches and small purchases with cash, and bringing home change was a nightly occurrence.  Now that using a payment card has become my most common form of payment, I often end the work day with no change at all — but habit makes me check my pockets for change, just the same.  The reduction of change in our lives is another simple sign that the economy is changing, and our personal practices are changing along with it.

But I still pay for some things with cash, and even if it takes longer than before, the change box gets filled.  Last night I noticed that the box is filled, again, so it’s time to empty it out, fill up the old-fashioned paper coin sleeves, and take them to the bank to add another $34 to the account and feel the satisfaction of saving.  That’s what will be on the schedule for tonight, and I’m kind of looking forward to it.

 

Ringing The (Taco) Bell

This year, Taco Bell is going to be experimenting with a new approach to recruiting qualified restaurant managers:  in certain labor markets, it has announced it is willing to pay an annual salary of $100,000 to managers of company-owned Taco Bell stores.

taco-bell-kiosks-digital-strategy-qsrThe Taco Bell initiative is a response to a very difficult labor market for employers.  With the current unemployment rate at historic lows — the product of a strong job market and lots of aging Baby Boomers moving into retirement, among other circumstances — there just aren’t many good candidates out there.  So Taco Bell is going to test, in certain markets in the Midwest and Northeast, whether paying a $100,000 salary brings in a better crop of candidates.  That represents a significant increase over the current starting salary for Taco Bell store managers, which ranges from $50,000 to $80,000.

The Taco Bell manager initiative isn’t the only evidence of a tight job market and wage pressure.  The article linked above notes that other companies operating in the fast-food restaurant market — typically the classic source of low-paying, entry-level jobs — are reporting wage pressure affecting their margins.  Just this week the Bureau of Labor Statistics reported that in the fourth quarter of 2019, “median weekly earnings of the nation’s 118.3 million full-time wage and salary workers were $936, an increase of 4.0 percent from a year earlier ($900).”  The BLS statistics show wage growth in 2019 above the rate of inflation (which was about 2 percent) in all age categories except workers between 55 and 64, with workers in the 25 to 34 age range showing especially strong wage increases.  And the BLS wage statistics indicate the labor market is particularly good for women, with median weekly earnings for women in 2019 up by 6.2 percent.

Imagine — making a six-figure income as the manager of a Taco Bell!  Your parents never would have thought it was possible.

Merry Market

If people seem merrier than normal this holiday season, here’s one potential reason for that:  the stock market.

846-06112288For all of its other issues, 2019 has been a banner year for the stock markets.  One recent estimate calculates that, worldwide, stock markets have gained more than $15 trillion in value this year, and the United States has led the way, with the major U.S. stock indexes all achieving double-digit gains.

That’s good news — very good news — for most Americans.  Although the stock market once was the province of the wealthy, the advent of 401(k) plans, mutual funds, and other investment devices have broadened the base of stock market investors.  According to one recent survey, more than half of all Americans own stock, either directly or through an ownership interest in a mutual fund, and that number is growing.  The increase in the number of investors obviously has helped to fuel the run-up in the markets — according to the law of supply and demand, increased demand means higher prices — but it also means that more Americans are enjoying the fruits of the strong market performance.  Whether it is retirees who are thrilled to watch their nest egg grow, or working people who are seeing their 401(k) investments making an earlier retirement a possibility, many people are now touched by the stock market — and when the markets go up, they’ve got a smile on their faces.

And it’s pretty clear, too, that a stock market surge runs in parallel with strong economic performance.  There’s a chicken-and-egg element to what causes what, but clearly growing stock portfolios make investors more optimistic and willing to spend — and their spending, in turn, helps to fuel job growth, better corporate performance, and better stock performance.  That may be part of the reason retail sales this year were very strong, with analysts estimating that Saturday’s sales set an all-time, single-day record.

Of course, markets go up, and markets go down, and a downturn is inevitable.  For now, though, many Americans are very much enjoying the stock market roller coaster ride.

Orange Man

Kish received Orange Man as a gift from her long-time pal the Beagle Lover.  Orange Man is a plump figure about the size of a large Idaho potato made of light, durable, ever-squishable foam.  With his fierce expression, open mouth, orange skin, and shock of carefully coiffed blond hair, Orange Man is a pretty unflattering caricature of the current occupant of the Oval Office.

The Beagle Lover explained that Orange Man is intended to be a kind of stress-relief device.  If you’re upset with the day’s news or an ill-advised tweet, you can squeeze, punch, or hurl Orange Man to work out the anger and frustration without causing any real damage, and Orange Man will always be ready for more.  In that sense, Orange Man is designed to be a kind of “rage room” in miniature.

During my lifetime we’ve had some pretty unpopular Presidents, among certain segments of the population at least, but I don’t remember the creation and sale of mocking Nixon figures or Carter figures that were made to be thrown around.  President Trump has to win the prize for generating the most tangible ways of expressing opposition — from bumper stickers to internet memes to figures like Orange Man.  In fact, I wonder:  how much of the current strength of the economy is attributable to the production of Orange Man and other anti-Trump items?

Old, And Still Working

America’s elderly are working at levels not seen in decades.  Is that a good thing, or a bad thing?

This year, the participation rate in the labor force of retirement-age workers — that is, workers aged 65 and older — has cracked the 20 percent mark.  That’s the highest participation rate in 57 years, and twice as high as the low mark participation rate in 1985.  Since 1985, the rate of participation has steadily moved upward, with a significant increase in recent years.

seniorsThe Bloomberg article linked above suggests that many of these working elderly are doing so because they have no choice:  “Rickety social safety nets, inadequate retirement savings plans and sky high health-care costs are all conspiring to make the concept of leaving the workforce something to be more feared than desired.”  But the statistics indicate that at least some of the people who are working longer are doing so by choice, rather than by desperate need.   The share of all employees age 65 or older with at least an undergraduate degree is now 53 percent, up from 25 percent in 1985, and the inflation-adjusted income of those workers has increased to an average of $78,000, 63 percent higher than the $48,000 older folks brought home in 1985.  The increase in wages of the working elderly is better than the increase for workers below 65 during that same time period.

So why are people working longer than they used to?  To be sure, some may be doing so because they’ve got no choice — America’s retirement savings statistics are dismal.  But if that is the root cause for some significant percentage of the working elderly, why is that a bad thing?  If people haven’t saved, working longer in order to build up your retirement nest egg, and cut down on the number of years in which you’ll be living on that nest egg, is just the responsible thing to do.  We shouldn’t feel sorry for them, we should be applauding them for recognizing that, when it comes to retirement planning and saving, it’s better late than never.

The more interesting and deeper trend is that the economy is welcoming these older workers and rewarding them with increasing salaries.   In short, it’s not like all of these older workers are serving as friendly, red-vested greeters at Wal-Mart.  The salary statistics indicate that the job creation in the current economy is strong, and that companies are holding on to experienced older workers rather than incentivizing them to retire.  They are recognizing that older workers have value, and still have something to contribute.  If you are an older person who likes working and wants to continue to work, that’s a very encouraging trend.