Government Data Is Garbage: Elon Should Focus On Fixing That Next

 By Peter Tchir of Academy Securities

Data, "Rules" & Messiness

It is difficult to believe that the inauguration was only 2 weeks ago, given the fast and furious pace of executive orders and headlines. DOGE has been even more “prolific” in terms of generating headlines than I would have ever guessed, and I already thought it would be impactful. It is going to be interesting.

But that takes us away from a few key topics for today.

Data

If you thought that we were going to start with jobs data, you are mistaken. Today, “inflation expectations” deserve some attention. Right around 10am ET Friday, the stock market started to decline. Until that moment, it had done fairly well even as yields increased on the back of the jobs report. Then out came the University of Michigan CONsumer CONfidence data, showing 1-year inflation expectations jumping from 3.3% to 4.3%! This was lucky for us, as we had pointed out in our NFP Instant Reaction – What to Do With Data You Don’t Trust that we were moderately bearish risk assets. Consumer inflation expectations were not on my bingo card of what could turn stocks, so I guess that we can classify that under “better lucky than smart.” We should just run with it, but we cannot help ourselves. We have never fully understood:

• Why does the Fed place so much weight on inflation expectations, particularly from survey data? From people who aren’t experts?
• Not saying that “experts” have all the answers, but do these individuals really have precise, realistic estimates in mind? Maybe the options should be high, above average, average, below average, and very low? I’m hesitant to put a specific number on inflation for the next year and I spend a LOT of time thinking about it.
  • For the first time in my life, I was motivated to go to their site and see what it takes to become a respondent. But with my VPN turned on during my flight from San Diego (where Academy just hosted a great Geopolitical Summit), I couldn’t access the site. But it is on my “to do” list now.
• But this is the real kicker!

• I have no idea how UMich comes up with an average of 4.3. Nor do I really care. Not just for the reasons listed earlier, but also the fact that Republicans are expecting 0 and Democrats are looking for 5% seems insane. It is “almost” like Republicans put in low numbers, hoping the Fed sees and cuts rates (or they just believe in DOGE and the president). It is also “almost” like Democrats put in high numbers, hoping the Fed sees and doesn’t cut rates (or they don’t believe in DOGE and the president’s policies). I understand that political views could influence inflation expectations, but this seems extreme!

Since the inflation expectations data helped trigger the risk asset sell-off that I was leaning towards, I should be happy, but it seems so ridiculous that it needed to be highlighted!

“Rules”

Speaking of things so ridiculous that they need to be highlighted, let’s look at some economic “rules.”

In physics, what we consider rules are termed laws. But for most people, rules are a set of “things” that need to be followed. Whether they are laws or axioms, they are things that are clear and explicitly define and control actions. On the other hand, conjectures, educated guesses, and “rules of thumb” are general guidelines that often work or point you in the right direction. But by no means are they immutable rules that must be followed.

So why do economists insist on terming certain things rules that are really conjectures? Probably because it sounds better, especially if you want people to believe that they work. Or maybe it just makes it easier to win prestigious economic awards?

But we revisit this subject today, not to focus on how inaccurate it is to call many of these things rules, but to highlight that the so-called rules definitively don’t work when they are based on inaccurate data!

Let’s look at the Sahm Rule which came to prominence this summer. It predicts that when relatively rapid changes in the unemployment rate occur, a recession will follow. I was too lazy to look up the exact definition (airline wi-fi, limitations of working on a laptop, lack of interest), but it is something like when you get a 0.5% increase from high to low (using a 3-month average) within 6 months, we get a recession. Many claimed it happened this summer. Some, I think, argued that with rounding, it didn’t occur. But NONE OF THAT MATTERS! We just learned on Friday that the BLS said there were 2 MILLION more workers in the labor force last year than previously thought! A big enough number, that if we knew in real-time, would likely have dramatically changed all of the unemployment rate data that not only triggered things like the Sahm Rule, but also probably affected monetary policy!

And let’s not even get started on things like the Taylor Rule or anything that depends on R*.

GDP – a somewhat wild guess that gets amended, often significantly.

Inflation, time and again, seems to defy what we live and breathe. With hedonics, measurement issues, and well-known issues (like the lag on OER), it is difficult to take it as seriously as we are expected to (measured to 1 or 2 decimal places).

So, basing “rules” on things where the data is unlikely to be accurate is bad enough, and then layer in the risk of treating something as a rule, rather than a decent theory, and we are ripe for more policy mistakes (yes, I believe these issues contributed to transitory, etc.). Let’s not even get started on R* or the neutral rate.

If this rant seems at all familiar, it is because we covered it last month in Jobs and AI. Maybe I’m motivated to hammer this home because I’m actually hopeful that there is the possibility of achieving some change?

Whether or not we like any, all, or none of the things this administration is doing, they do seem open to change.

If we could get better, more accurate, and timely data, we should be able to make better decisions.

That would reduce the risk of policy error, poor business decisions, etc., which would be great and is why I think it should be a priority for the government to revisit – especially in this day and age where almost everything is stored electronically, updated in real-time, and we have the ability to harness AI like we’ve never had before!

Elon, if you read this, please think about it! Wouldn’t you want better, more accurate, and more timely information in your decision making?

Messiness

Reciprocal Tariffs came up on Friday, adding to the problems stocks and bonds were facing. This is very much in line with my current concerns and the view that this year will be messy, but manageable.

• The market seems to have settled on the view that these are all just “negotiating” ploys. That has led to muted or short-lived market reactions. While we were fully on board with fading last weekend’s tariff war (kind of comical to write that sentence), we are not so comfortable fading tariffs now.
  • Both Canada and Mexico got 30-day reprieves (to some extent) just for agreeing to do what they had already been planning to do on some level. Small win for the president, but not overwhelming. In the case of Canada, I expect the president to decide that it wasn’t enough, and he needs more tariffs. I think that is a mistake for many of the reasons (regarding supply chains) listed last weekend in The New Trump Tariffs. The complexity of existing agreements and the efficiencies built into the supply chain will be disrupted, causing more harm than good for both countries.
  • There are many in the administration (presumably based on UMich responses) that like the idea of getting more and more revenue from tariffs (in order to cut taxes). I cannot say that I completely disagree with that view, but it could be taken to extremes.
  • You can rattle the cage (so to speak) so often before the people inside that cage start making some plans of their own. Tariff uncertainty, even if intended to be a bargaining tool, could turn into tariffs depending on the responses, but could also cause changes to supply chains as companies get tired of the risk. If you assume, as I do, that supply chains are fairly optimized to be efficient, changes (for whatever reason) will be problematic (with inflation being the first potential issue).

Expect more noise on tariffs as the market has become too complacent, and I think that it is now far more likely to face a downside rather than an upside surprise from “negotiations.” A different view than I had last weekend, but things move fast in 2025!

Crypto

We now, apparently, have a sovereign wealth fund (more on that in the future). We have a “Crypto Czar” who gave a speech surrounded by crypto supporters. We have multiple states trying to pass some sort of crypto reserve (no idea why, other than it is popular and probably attracts some nice campaign promises), yet as of the time that we are writing this, Bitcoin is “only” at $96k.

That seems odd to me. Never has there been so much public support, but so much has been priced in that it is difficult for it to go higher. Maybe, also, on the down days, we realize that because it is hard enough to put a price on things that in theory we know how to value (stocks and bonds), it is nearly impossible to figure out a “fair value” for a bunch of 1s and 0s? The Rise and Fall, or more like the Meteoric Rise and Plummet of meme coins, might also be making some wonder about the validity of the “store of value” nature of this “scarce asset?”

When you get positive headline after positive headline and don’t get the response that you expect, it is time to get nervous.

Bottom Line

Look for moderately higher yields. Shorts have been squeezed. This market, which seems to rapidly oscillate between overbought and oversold, appears to be overbought again. Expect a lot more “cost savings” headlines from DOGE, especially as they start looking at big programs (like Medicare and the Defense Budget). However, it won’t be enough to offset spending, tax cuts (the deficit will continue to rise), or the very real risk that supply chains will be less efficient (due to tariffs or the response from tariff noise) creating inflation pressures (for Democrats, Republicans, and Independents, alike). Still targeting 4.8% to 5% on 10s with 2s/10s getting to at least 50, with 75 as a longer-term target. Bessent does seem focused on getting 10s down, but that might be far easier said than done, especially given the current policy priorities.

On equities, look for some overall weakness in U.S. markets. Expect value and equal weighted indices to outperform market weighted indices. Be wary of small caps. As much as I’d like to include small caps in my list of outperformers, they seem more likely to bear the brunt of tariffs and policy mistakes than large companies. Just above 5,800 on the S&P 500 is my target, with risk of a big move to the downside if markets decide we’ve been too optimistic about what can be done quickly. Longer term I’m optimistic, but I don’t like the overall market right now (especially since I don’t think yields/the Fed will be helpful).

Look for foreign markets to outperform the U.S. (positioning is so tilted the other way, that it won’t take much to get this going). Especially if the dollar continues to increase on the back of tariffs.

I don’t like commodities themselves, but I do like the commodity producers and those companies that play an important role in the extraction and processing of commodities!

For the first time in what seems like eons (I’m pretty sure it has been shorter than that) I’m leaning towards being bearish credit spreads. Last time we were bearish on corporate credit, this time it is on spreads (in addition to overall yields).

• IG is tight. We all know that, but with all the uncertainty, it could be difficult to maintain current levels of tightness. A strong dollar may hurt profitability at some large global corporations. If spreads weren’t so tight, not a big deal, but they may need to widen a touch on that. If M&A is returning (part of our thesis), that tends to be negative for IG as those are the companies that can be levered up. Not thinking a big move, but time for some caution.
• HY is more susceptible than IG. If I’m getting a bit worried about small caps, I have to worry a bit about high yield. Though there seems to be an entire cottage industry dedicated to shorting high yield, so any damage to the market should be small.

Good luck and hopefully I’m not the only one who already feels like this has been a long year! No shortage of things to think about, to react to, to anticipate, and to do!

https://www.zerohedge.com/markets/government-data-garbage-elon-should-focus-fixing-next

Musk Says DOGE, Treasury Agree On New Anti-Fraud Measures To Claw Back $50 B In Payment Fraud

 by Tom Ozimek via The Epoch Times,

Elon Musk said Saturday that the Department of Government Efficiency (DOGE) and the U.S. Treasury Department have agreed on new anti-fraud measures aimed at preventing tens of billions of dollars in fraudulent government entitlement payments each year.

In a Feb. 8 statement shared on social media, Musk described the scale of the problem as “utterly insane,” citing estimates that at least $50 billion annually is being lost due to improper payments, including funds going to individuals without Social Security Numbers or even temporary ID numbers.

Musk, who leads DOGE and has been designated a “special government employee” by President Donald Trump, revealed in the post that Treasury officials estimated that $100 billion in annual entitlement payments may be going to individuals without verifiable identification.

In a discussion with Treasury personnel, Musk said he asked for an estimate of how much of that is “obvious and unequivocal” fraud, and the consensus was that at least half—$50 billion per year, or around $1 billion per week—is fraudulent.

“This is utterly insane and must be addressed immediately,” Musk wrote, adding that the DOGE team and Treasury have jointly agreed to a series of reforms.

One of the most significant changes will be the requirement that all outgoing government payments include a payment categorization code. According to Musk, these codes are essential for financial audits, yet they are frequently left blank, making it nearly impossible to track where taxpayer dollars are going.

Under the new rules, every payment will also need to include a rationale in the comment field. Currently, many government payments lack any explanation, making it difficult to assess their legitimacy, Musk said. While he emphasized that no judgment will be applied to these rationales at this stage, requiring at least some justification for payments is expected to serve as a deterrent against waste and fraud.

Another reform involves more effective implementation of Treasury’s Do-Not-Pay list, which is meant to prevent payments to fraudulent entities, deceased individuals, suspected terrorist fronts, and other entities or people who should not be paid by federal agencies. Musk said that this list has not been strictly enforced, with some payments still being made to flagged entities. He also pointed out that it can take up to a year for names to be added to the list, calling for weekly or even daily updates to prevent ongoing fraud.

Musk said that the above “super obvious and necessary” changes will be implemented by existing, long-time career Treasury employees; not anyone from the DOGE. His remarks in this regard align with Treasury Department Scott Bessent’s insistence that DOGE members have read-only access to Treasury data and that they have not been “tinkering” with sensitive payment systems at the department.

The development comes as DOGE focuses its cost-cutting and efficiency-enhancing efforts at multiple federal agencies, including Treasury, as part of the Trump administration’s broader aim of reducing deficits and eliminating fraud, waste, and abuse from government.

Republicans have praised DOGE’s efforts to identify government waste, while Democrats have denounced the body’s actions as an abuse of power and its operations as skirting congressional oversight. There have been protests over DOGE by members of Congress, federal employee unions, and privacy advocates, along with a number of lawsuits targeting its activities. Recently, a judge blocked DOGE’s access to the personal financial data of millions of Americans at the Treasury Department.

Bessent recently defended DOGE’s actions at Treasury. He said in an interview with Bloomberg that the DOGE team is made up of highly trained professionals and “not some roving band running around doing things,” possibly in reference to claims by critics that DOGE has embraced and is applying the adage “move fast and break things,” which is part of the Silicon Valley start-up culture of being innovative, nimble, and disruptive.

“This is methodical and it’s going to yield big savings,” Bessent said of DOGE’s work at Treasury.

In a follow-up post on Saturday, Musk said that the reason no action was taken under prior Treasury leadership to tackle the $50 billion or more in fraudulent government payments is complacency.

“Nobody in Treasury management cared enough before,” Musk wrote. “I do want to credit the working level people in Treasury who have wanted to do this for many years, but have been stopped by prior management. Everything at Treasury was geared towards complain minimization.”

The Epoch Times has reached out to the Treasury Department with a request for comment.

https://www.zerohedge.com/political/musk-says-doge-treasury-agree-new-anti-fraud-measures-claw-back-50-billion-payment-fraud

San Diego Supervisor Says Border Now Ghost Town Under Trump's New Policies

 Donald Trump has been in office for about three weeks. In that time, he signed an executive order to secure the southern and northern borders, deploying thousands of US military troops to restore national security. Now, a senior official at one of the nation's busiest illegal border crossings has taken to X to highlight the stark difference at the border under the Biden-Harris regime in the last four years and the current situation. 

On Saturday afternoon, San Diego County Supervisor Jim Desmond said the San Diego border region was one area left wide open by Democrats... 

"For the past four years, our border has been wide open, allowing millions of people to enter the country without proper vetting, including hundreds of thousands here in San Diego. I saw it firsthand—human traffickers dropping people off and walking through into the country without being stopped. Last year, for the first time since the 1980s, San Diego had the highest number of border crossings in the nation," Desmond said. 

The official then described the current border situation under Trump and his new policies: "With a new administration in place, I went back to the San Diego border to see what's happening now. The numbers have dropped dramatically—less than 100 people are crossing a day in San Diego. It's a stark contrast to the chaos we saw just months ago." 

At the end of Trump's first full week in office, the president posted a graph on Truth Social that shows the collapse in daily encounters of illegals on the border. 

Voters are witnessing swift progress at the border, strengthening their confidence in the president. Folks have now seen firsthand that securing the border only takes a few short weeks and an executive order. At the same time, globalists in the Biden-Harris regime lied to the American people that the only way to secure the border was through Congress. 

Meanwhile, globalist Democrats and their billionaire funders who pushed open borders and wrecked national security will no longer be able to hide behind their public/private censorship blob as Trump, Elon Musk, and DOGE rip down the leftist Matrix. The era of accountability has arrived. 

https://www.zerohedge.com/geopolitical/san-diego-supervisor-says-border-now-ghost-town-under-trumps-new-policies

Trump, Musk, and the Deep State: The Battle Over Transparency Begins

 Here we go again. At the beginning of his first term as president, Donald Trump issued an executive order temporarily banning travel from several countries—Yemen, for example, Sudan, Libya, and four others—that had been identified as major exporters of terrorism.  The left went nuts, excoriating Trump for his “racist” “Muslim travel ban.”

It wasn’t a “Muslim travel ban,” but try telling that to Seattle District Court judge James Robart. He sniffed the air, sensed the pleasing hysteria and press coverage, and issued a cursory restraining order against Trump’s executive order. The humorous part of Robart’s order came towards the end.  As I wrote at the time, Robart insisted that the “declaratory and injunctive relief” outlined in his order be applied immediately and on a “nationwide basis” (my emphasis).

Seattle has spoken, Comrades! Judge Robarts finds (where? how?) that his court has jurisdiction over … well, over just about everything: the president and the head of the Department of Homeland Security, for starters, but also “the United States of America (collectively).”

So all across the fruited plain, “Federal Defendants and all their respective officers, agents, servants, employees, attorneys, and persons acting in concert or participation with them are hereby ENJOINED and RESTRAINED” from enforcing the President’s executive order.

This may be the best place to pause and point out that Donald Trump, acting as the president of the United States, was perfectly within his rights to issue an executive order to suspend travel from particular countries.

And so it is now with Trump’s deputies in the Department of Government Efficiency.  Tasked with the Herculean labor of unscrambling the byzantine Rube Goldberg device that is the 21st-century administrative state for furthering corruption, illegal payments, and partisan influence at home and abroad, DOGE commander Elon Musk and his laptop-and-algorithm-toting lieutenants have been patiently uncovering the pyramid of waste, fraud, and abuse that is the foundation of the United States government in its twenty-first-century incarnation.

In a remarkable piece called “Override: Inside The Revolution Rewiring American Power,” a blogger known as EKO showed how it worked. Four young coders arrive at the Treasury Department in the wee hours of January 21.  Within hours they have succeeded in tracing long-hidden payment directions.

No committees. No approvals. No red tape. Just four coders with unprecedented access and algorithms ready to run.

“The beautiful thing about payment systems,” noted a transition official watching their screens, “is that they don’t lie. You can spin policy all day long, but money leaves a trail.”

That trail led to staggering discoveries. Programs marked as independent revealed coordinated funding streams. Grants labeled as humanitarian aid showed curious detours through complex networks. Black budgets once shrouded in secrecy began to unravel under algorithmic scrutiny.

The difference between Trump’s first term and his second (acknowledged) term can be explained in two words: velocity and preparedness.  In 2017, Trump’s initiatives were hampered, blindsided, litigated, and smothered in red tape.  This time the Leviathan’s usual expedients are impotent. “Their traditional defenses—slow-walking decisions, leaking damaging stories, stonewalling requests—proved useless against an opponent moving faster than their systems could react. By the time they drafted their first memo objecting to this breach, three more systems had already been mapped.” And here’s the point:

“Pull this thread,” a senior official warned, watching patterns emerge across DOGE’s screens, “and the whole sweater unravels.”

He wasn’t wrong. But he misunderstood something crucial: That was exactly the point.

The left gets it. And their heads are exploding.  So far, their biggest gun was the creaky cannon Judge Robart wheeled out: the emergency injunction with immediate “nationwide effect.”

The New York Times, a house organ for anti-Trump hysteria, has a long hand-wringing column about the latest wheeze. Paul A. Engelmayer, a U.S. District Judge appointed by Barrack Obama, just issued an “emergency order” to restrict Elon Musk’s and DOGE’s access to the Treasury Department’s payment and data system.  He also insisted that anyone who had access to those systems after January 20 “destroy any and all copies of material downloaded from the Treasury Department’s records and systems.” Fun part: even Scott Bessent, the Secretary of the Treasury, is prohibited from looking into the corrupt structures of his own department.

Engelmayer’s order came in response to a lawsuit filed on Friday by Letitia James, Attorney General of New York and professional scourge of all things Trump, along with 18 other Democratic state attorneys general. What was the charge?  The stated predicate was that by authorizing the investigation, Trump had failed in his Constitutional duty to “faithfully execute the laws enacted by Congress.” The real predicate was that Musk’s beavers were uncovering the inner mechanism of the deep state and the resulting truths were unbearable.

“Humankind,” said T. S. Eliot, in “Burnt Norton,” “cannot bear very much reality.” Similarly, Bureaucrats cannot bear very much transparency.  Like vampires, the sunlight is fatal to them.

How will Trump respond?  We do not know yet.  I hope it will be at least partly as Andrew Jackson is said to have responded in his contretemps with Chief Justice John Marshall.  In 1834, the Supreme Court determined that the Cherokee Indians owned Northern Georgia. Nevertheless, Andrew Jackson evicted the Indians, reputedly observing that Marshall “has made his decision; now let him enforce it.”

Lincoln responded in a similar fashion to Chief Justice Roger Taney in 1861. In April of that year, Lincoln suspended the writ of habeas corpus between Washington, D.C., and Philadelphia. This allowed military commanders to imprison suspected saboteurs without indictment. Taney said (in “Ex Parte Merryman”) that Lincoln did not have the authority to do this. Lincoln basically ignored him, invoking the novel doctrine of “nonacquiesence.”

As usual, Lincoln demonstrated his deep understanding of the issues involved. “Are all the laws but one to go unexecuted,” he asked Taney, “and the Government itself go to pieces lest that one be violated? Even in such a case, would not the official oath be broken if the Government should be overthrown when it was believed that disregarding the single law would tend to preserve it?”

In my view, Trump’s actions to expose the partisan corruption of the administrative state are in response to an existential threat is as grave, if less bloody, than the Civil War. The permanent bureaucracy that rules us has for decades been erecting and fortifying a nearly impenetrable edifice from which to preserve its privileges and power, stifle criticism, and export its globalist agenda.  Donald Trump was elected to deconstruct that edifice. Elon Musk is one of his most potent aides in accomplishing that task.  Of course, the left is hysterical.  Their gravy train is being derailed before their eyes. The people who elected Trump are delighted.

I suspect that the squeals and tantrums of the ruling party and its minions will amount to no more than theater. I further suspect that Trump will resort not only to “nonacquiesence” but also to non-payment.  In 2022, New York received $383 billion in federal spending. There are many ways in which Trump could stanch the flow of federal dollars to obstreperous states. I think he should consider them all. I am also happy to see some official pushback.  Rep. Darrell Issa, for example, just announced that he is “immediately introducing legislation next week to stop these rogue judges and allow Trump and DOGE to tell you where government is spending your money.” Good for him.

One final suggestion. If left-wing regime-party judges can issue emergency restraining orders with “immediate nationwide effect,” why couldn’t a politically mature district judge in, say, Alabama do the same, overturning the order issued by his left-wing colleague on an “immediate, nationwide basis?”  I offer the idea free and for nothing.

Roger Kimball is editor and publisher of The New Criterion and the president and publisher of Encounter Books. He is the author and editor of many books, including The Fortunes of Permanence: Culture and Anarchy in an Age of Amnesia (St. Augustine's Press), The Rape of the Masters (Encounter), Lives of the Mind: The Use and Abuse of Intelligence from Hegel to Wodehouse (Ivan R. Dee), and Art's Prospect: The Challenge of Tradition in an Age of Celebrity (Ivan R. Dee). Most recently, he edited and contributed to Where Next? Western Civilization at the Crossroads (Encounter) and contributed to Against the Great Reset: Eighteen Theses Contra the New World Order (Bombardier).

https://amgreatness.com/2025/02/09/trump-musk-and-the-deep-state-the-battle-over-transparency-begins/