Psst! Want The Cpi Number?

Soon the Web will be abuzz with economic rumors

Just when you thought that more than enough noise has been made about whisper numbers--Wall Street's inside buzz about what a company will actually earn as opposed to the "official" published consensus number from analysts--there's more. These rumors will soon be used to forecast everything from economic indicators to company revenues to the Dow Jones industrial average.

Indeed, whisper numbers are becoming more mainstream--and they have caught the eye of Big Business. Traditional research firms that are devoted to publishing analysts' consensus estimates, such as First Call, have recently started offering so-called whispers, which are little more than unofficial forecasts. IBES, another firm, will start offering them soon. And there are at least five Web sites that publish them. One,, whose parent, Internet Financial Network (IFN), was recently acquired by Citigroup, offers whispers on earnings but soon will feature buzz on 27 economic indicators, such as gross domestic product, housing starts, producer price index, and consumer price index. The sites eventually will offer similar data for global markets, starting with Japan, Mexico, and Brazil.

ON THE MARK. "Whisper numbers sell, and Corporate America has figured this out," says Susan Watts, a finance professor at Purdue University and author of a study on them. "People think they're getting insider information that will give them an investing edge, and they're willing to pay for that information." Or at least the Web sites are willing to give the information out for free, hoping numerous hits to their sites will attract advertising dollars.

But coming up with a whisper for an economic indicator such as the CPI is much more challenging than arriving at an earnings whisper. Experts tend to agree that earnings whispers are derived from one of three sources. The first is an analyst who tells his "best" clients that his projected number may err on the low or high side. The client then passes this information along. Second, sharp investors look at a company's earnings history, compare it with the consensus, and discover that the company beat consensus estimates for six quarters running by a penny. The whisper is that earnings will beat the consensus again by a penny. Third, word can come from company insiders--employees and investor-relations folks--who get the word out. says it uses proprietary software that scans the Internet for its info. "We get hundreds, even thousands, of whispers off message boards, chat rooms, and news groups," says Paul Hauck, a co-founder of But because there are likely to be far fewer messages on economic data, experts say, it's more difficult--some say impossible--to arrive at a whisper that truly reflects what the smart money is thinking.

Whispers do, in fact, give investors a trading edge--at least when it comes to the buzz on earnings. According to the study by Watts and two other professors, Mark Bagnoli from Purdue and Messod D. Beneish from Indiana University, whisper numbers are more accurate than analysts' consensus forecasts. The team looked at numbers on the message boards of such Web sites as Silicon Investor, Motley Fool, and Yahoo! Finance for two years and found that although whispers gleaned from the Net tended to be too high, they were a lot closer to actual earnings than were analysts' estimates.

Experts say that whispers on the economy always have existed, but never before has there been a centralized place to publicize such numbers. "If you go to a Salomon trading desk and talk to a bond trader, he'll tell you the whisper on the consumer price index. When earnings aren't driving stocks, people look to other areas, like economic indicators," says Hauck.

Some traders and money managers say that they would dearly like to get such information. Matthew Johnson, who is head of Nasdaq trading at brokerage Lehman Brothers Inc., says: "If they prove to be more accurate that the published numbers, they could give you a trading edge, especially if you get them in advance. I'd be willing to pay for them then."

MOVING MARKETS. There's another reason why investors like whispers: Studies show that they are increasingly distrustful of Wall Street and the advice of its pundits. "A bank economist may give a biased view because his bank holds a long position in bond futures. Investors are waking up to this," says John Scherr, who is's other co-founder.

And whisper numbers are proliferating because of the Internet. "The Internet is having an effect on the way we evaluate stocks and the market at large. You have to wonder about the validity of opinions of Internet posters, but it is a way to gauge the sentiment of numerous investors," says Jeffrey Heisler, assistant finance professor at Boston University.

Indeed, experts say that as whisper numbers on economic data become more widely used, they will become a driving force in the overall stock market. For example, if the economists' consensus estimate for the monthly number of new hires is a tepid 100,000, stock and bond markets would stay strong. But if the whisper number, expected to come out two weeks prior to release of the actual data, is 300,000, the markets would most likely take it on the chin. If the actual number comes in at 225,000, both the stock and bond markets would rally. Those who looked only at the consensus number would be mystified. But they wouldn't be in the know. The markets would rally because investors were expecting a higher, inflation-generating figure.'s founders could be on to something--especially if economic indicator whispers turn out to be more accurate than the forecasts of economists. "Over the past decade, economists have consistently overstated inflation figures while understating employment figures," says Michael D. Boldin, senior economist for, a Web site that focuses on the economy, and a former senior economist at the Conference Board.

POPULAR OPINION. "Since whispers on earnings have proven to be more on the mark than the analysts' consensus, we think these may be, too," says Jack L. Rifkin, executive vice-president of Citigroup Investments Inc. Rifkin, who is on the board of, believes whisper numbers gauge investor sentiment, which largely drives the market.

Moreover, Rifkin says that economic indicator rumors will be especially effective at picking up trend reversals. "If polling is done properly, the popular sentiment should pick up a change or inflection point before economists do," he says. "Economists typically rely on past performance of an indicator rather than the current environment."

In several months, will also feature unofficial forecasts on stock indexes, such as the Dow average and the Standard & Poor's 500-stock index. The site will also report whispers on the revenues of highly priced Internet companies that have yet to post a profit.

In the final analysis, the success of economic indicator whispers will depend on how accurate they are compared to economists' forecasts. Considering the record of economists, that's not much of a high hurdle. Economic whispers may be the new buzz on Wall Street.