Monday, September 2, 2002

Alan Abelson

By any other name

Chastity House.

The very phrase conjures up an abode of undiluted purity. A hush and sequestered convent. A Shaker B&B.

In Iran, it's a legalized brothel.

Tehran, of course, is touchy about anything that suggests the nation it rigidly controls isn't paradise found. But calling houses of ill-repute chastity houses means we've been too hard on the ayatollahs — somewhere buried in those ferocious beards and maniacally burning eyes is a sly sense of humor.

It emerges that Iran has a prostitution problem: The New York Times reports that the capital alone harbors 300,000 ladies of the night. Chastity houses are supposed to get them off the streets and out of sight. And the far-out euphemism, meanwhile, preserves the illusion, sacred to its robed rulers, of pristine Persia.

The notion of dubbing a bawdyhouse a chastity house should strike a highly sympathetic note in Wall Street, which is justly famous for calling a spade a precious tool for uncovering the earth's treasures. (We sure hope the comparison doesn't offend any of those mean-looking cats in Tehran; last thing in the world we want is for those guys to do a Salman Rushdie on us.)

We're particularly taken in this regard with the ability of any number of Street economists to affix a proper label on a trend that ignorant civilians might tag as something completely different. When discussing the current direction of the economy, for example, it is important to understand that sideways is not sideways but lateral progress.

In like vein, unemployment is not lost jobs but encouraging evidence of cost reduction (especially encouraging, we assume, for those who may be next in line to be a reduced cost). And what makes cost reduction via lost jobs cause for celebration not condolence is that it's the ticket to higher profits.

Except that it ain't necessarily so. The Commerce Department reported last week that, in the second quarter, pretax corporate earnings were down some $13.4 billion, or 1.7%, from the first quarter. (The latter, for its part, had suffered a similar decline from the final three months of '01.)

But before you jump to any false conclusions, consult your friendly, smiling neighborhood economist and he'll be happy to remind you of a simple but crucial truism: Data that reinforce an upbeat forecast are called core numbers. Data that run counter to the upbeat forecast are called aberrations.

When, unheeding of the consensus forecast, new claims for unemployment insurance in the latest reported week took a rather sharp leap upward to over 400,000 for the first time since early July, it was obviously an aberration. Too bad someone neglected to tell the markets.

Sometimes, to be sure, there's no blinking negative news. Chain-store sales, contrary to the eager expectations of the all-silver-linings-no-clouds crew, have been dragging. In such instances, however, when it's too blatant to call blah anything but blah, there's a good and sufficient and nonrecurring explanation.

In the case of the limp chain-stores, the explanation is hot weather. Apparently, though, it's very discriminating hot weather that discourages visits only to the mall. Folks who are intent on buying a car or a house are not affected by the hot weather. Or, they must all live in the north country.

The sharp decline in the Conference Board's Help-Wanted Advertising Index in July obviously was an aberration intensified by the heat. Or perhaps employers seeking employees chose to put little signs in their shop windows rather than use the traditional avenues furnished by their daily newspapers. The latest reading of the index stood at a depressed 44, compared with 57 same time last year.

When you have real swinging data — data that hop hither and yon from month to month — they become in the lexicon of the rosy scenarists either meaningful or meaningless. Thus, the latest bullish report on that yo-yo series known as durable-goods orders was seized on as meaningful confirmation that the recovery is recovering. The next tally on durable goods will show a downswing, but then the figures will be dismissed as meaningless because they're too volatile to count.

Finally, you may have noticed — the markets certainly did — that consumer confidence extended its losing streak to three in a row in July and sagged to its lowest level since November. But not to worry. Consumer confidence, everyone knows, is a lagging indicator… unless it goes up; then, it becomes a leading indicator.

Ever wonder why that should be? Well, as near as we can determine chatting with economists, the consumer accounts for two-thirds of GDP when the confidence index is rising, but only one-third when it's falling.

And, anyway, we were told, don't pay attention to all that disconcerting data. For what we have is a stealth recovery. It doesn't look or act or feel like a recovery, but trust us (they often clasped our shoulder here), there is one.

Well, we guess if it's okay to call a brothel a chastity house, it's certainly okay to call what we have a real recovery.

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Created: September 4, 2002
Last modified: September 9, 2002
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