Lies, lies and damned statistics

“Daddy, I’ve been really good lately,” said DebtGirl, 5, over dinner last week.

Frankly, I was shocked by her comment. Until she defined “lately” as having started after lunchtime that day. True, post the lunchtime hissy fit that drew varied threats and sanctions, her behaviour had been excellent.

However, if the time measurement for behaviour was stretched to the whole day, or the preceeding week, any objective assessment of her demeanour would have been scored by the judges as “not within cooee of angelic”, or “just north of Poltergeist”.

I love comparisons and statistics. And DebtGirl’s attempt at spinning was admirable.

Statistics are fun reading … but only if you understand the time bias. The time bias is partly what 1800s British PM Benjamin Disraeli (who, like Kevin Rudd, was twice prime minister and not particularly popular among his own party) was referring to when he coined the phrase “lies, damned lies and statistics”.

That is, what statistics show depends on when you start and stop the count. Change the start or end point and the results will differ markedly.

With that disclaimer, the following statistic still doesn’t look so good.

When Kevin07 came to power in November 2007, the All Ordinaries was sitting at around 6500 points. Nine days ago – six years and three prime ministers after K-Rudd first came to office – the All Ords was at around 5150. A fall of roughly 20 per cent.

Few Australian governments in power for five years or more would have seen markets go backwards.

Further, statistics published in recent weeks suggest that under Labor, stock markets increase 9.5 per cent on average a year, while under Coalition governments, it’s 12.5 per cent.

I have no idea whether they’re accurate.

But, less than a week after the Government lost the election, media outlets are linking the new five-year highs for the stock market to the Coalition’s election? The result was accurately anticipated two weeks’ out. And the market was at similar levels in May, when Julia was still in charge.

So, do you dive into investment markets now that the Coalition is in power and the statistics suggest that the share market does better under Coalition governments?

“Danger! Danger Will Robinson!”

Just read again this quote from former PM John Howard. “I will guarantee that interest rates are always going to be lower under a Coalition government.”

If interest rates fall further from their current record lows, you’ll have bigger things to worry about. Like holding onto your job. Possibly breathing.

How should investors treat an incoming Coalition government? By looking at the statistics, of course!

Statistics require reading over extended periods. Never react to one set of stats. Pointless. They’re off and on like a bride’s nightie.

Look for trends over months. Here are a few that are, reasonably, unarguable.

Interest rates are low, making money cheap and gearing attractive. Unemployment is low, but slowly rising. Business and consumer confidence seems to have bounced from the bottom and are showing signs of recovery.

The stock market has performed incredibly over the last 15 months. Is it still under fair value? Debatable. But it’s still a long way from the ridiculous highs of the dying days of the Howard Government.

Property appears, increasingly, to have bottomed this year and is rising again. Property booms tend to run for a few years at a time.

When I look at statistics, I don’t react to any individual stat that comes out (or DebtGirl’s behaviour would only be measured in time periods that suggested she is Australia’s second saint).

Sorry DebtGirl, but I follow stats over longer periods. Believe me, that also sometimes works in your favour, with dispensation for recent good behaviour when you’re tired and things turn sour.

Given the change of government, here’s are my predictions for the next 12 months.

Cash: Pitiful. Interest rates are dead. No pulse. Fixed interest: Run was too good for too long. Not much. Property: this is where the smart money is headed, because it has been held back for two years. Shares: Australia’s economy and companies aren’t being given enough credit, or pessimism is still too overwhelming.

But where markets head over the next 12 months has as little to do with the new government as it does with DebtGirl’s meal time antics.

Bruce Brammall is the author of Debt Man Walking (, a licensed financial adviser and mortgage broker.