CIBC Sticks its Sell-Side Foot in its Mouth

One of the most oft quoted statistics of the past couple of months has been a CIBC World Markets study that suggests the cost of shipping a container from Shanghai to the US Eastern Seaboard (including inland costs) has risen to $8,000. But sometimes, statistics are just plain wrong. Over on Metal Miner, Lisa does a good job showing how some junior banker pulled this number out of his arse. According to Lisa's analysis; "the cost adjustments we've seen are more in the neighborhood of 15%. A client of ours was quoted on July 15 (when oil was at $138.74…it dropped over $6 that day) at $3450 for a container. That is up $225 from a few months earlier (Shanghai to north of Minneapolis) … Mysteriously absent from the analysis; the relative value of the dollar. Ask anyone buying or selling overseas why there are steep drops in imports and big increases in exports. It has absolutely nothing to do with freight or the cost of oil. It is because we have a cheap dollar."

What’s my take? All too often, reporters put their blind trust in so-called experts -- be they industry analysts in the technology world or sell-side analysts in the banking world -- as sources to support their own analysis. This incident at CIBC is further proof that just having a big name behind you is enough to push a supposedly "fact-based" analysis out into the mainstream however wrong and misleading it may be. Within fewer than three months following publication, this 'study' was cited by over one hundred publications that I found through Google (Google alone has over 10,000 citations to the study).

This represents highly shoddy and lazy reporting in my book. If journalists, bloggers and others want to report on the subject, they should turn to experts from companies like Emerson, GE, and UTC or consultants such as Ariba, AT Kearney and BCG with significant experience in this area. Alas, it's much easier to quote someone else's incorrect analysis than it is to do your own homework. Thanks, Lisa, for exposing a study that deserves to be analyzed for what it really is: A piece of pie-in-the-sky analysis from an analyst who clearly did not have any on-the-ground experience with the subject they were writing about and (perhaps most importantly) failed to dig deep enough to get it right.

- Jason Busch

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