Thursday's bright blog spot : Error correction John Mauldin
We have been searching a mighty long time but we finally found it : A piece of objective Anglo-Saxon coverage on the current sovereign debt crisis in the developed world. And it involves a respected UK blog comment criticizing a US some how "biased" view on the European and sovereign debt crisis in general. Now what is it all about ?
In his latest financial newsletter ("the lion hidden in the grass"), John Mauldin refers to France as the big elephant in the room or the most over-rated AA+ country in the world. In fact, France is Greece or even worse when looking at what is currently happening out there on the political front. How does Mauldin come to this conclusion ? Well just look at the following graphs coming from a BIS paper based upon OECD data and involving some scenario building :
1) First of all, Mauldin quotes the IMF as source but these are BIS graphs based upon OECD data (rule no1 of journalism and source checking). Now the point Mauldin is trying to make in his newsletter when using these graphs, is that these scenarios point to similar debt/GDP ratios for France and Greece. Now we have been blogging already on the fact that France has a structural weak public deficit, probably the weakest within the euro-zone, no surprise there. What Mauldin doesn't mention is the fact that the Italian scenarios basically score relatively well compared to France and the rest of the entire club. Now Mauldin can't do this of course because he has been hammering all along on GIIPS countries being "dooooommmeeeed !!!". And to conclude our first point of criticism : France = Greece seems a little bit extreme, this in view of the sectorial composition of the 2 economies
2) But now we come to a second and more important point. When using graphs in a presentation, you can massage the data or the point you are trying to make in various ways. A popular one for instance is to pick out the exact time frame/interval which proves your point, never mind the entire time series. But in this case, Mauldin pulls the cheapest trick by ways of selection and falls in his own bear trap because he uses a very frequently used database (myself included). In fact, what Mauldin did in his newsletter was to cut the above set of graphs in 2 and only show the top 6 graphs and leaving out Japan for example. Not only that, he left out the UK and the US, while leaving out Spain/Portugal comes in handy as well when looking at the graphs and numbers and in his vision on GIIPS. Now this is something I rarely have done myself, to be checked on the various postings I have made in the past. And there is a good reason for that : a selective memory or a selective choice can never be a long term winning strategy towards your customer base : or to popularly quote Abe Lincoln : You can fool some people some times but not all the people all of the times. Briefly, this perception bubble will rather sooner than later pop, if not by some one attentive then certainly by itself.
So my advice to Mr Mauldin would be as follows : It's everybody's right to join the choir of financial catastrophe journalism, whatever makes you happy. But when you do so, please try do make an effort in telling the entire story, if not for yourself, then at least for the sake of intellectual honesty, serving the democratic debate into something more constructive and positive. Nice try, close, but no sigar. And thanks FT Alphaville for making the world attentive to this injustice. Next !