By James Ledbetter

FedEx Corp (FDX) is having a tough morning, having announced a 6% drop in third-quarter earnings and - perhaps more ominously - also disclosed that neither the fourth quarter nor next year look particularly rosy. That kind of talk gets a lot of jaws flapping, on the premise that shipping companies possess on-the-ground data about how businesses are really doing. I’ve heard that spin from FedEx officials before and quite reliably, Erin Burnett and Bertha Coombs started jabbering about the “FedEx barometer” some time before market opening on Thursday.

The problem with the barometer metaphor is this: an actual barometer measures changes in atmospheric pressure and, when combined with measurements of the wind, can give you pretty reliable weather forecasts over a 12- to 48-hour period. But it can’t tell you a darn thing about what’s going to happen next week or next month.

By contrast, FedEx’s performance offers no time window whatsoever for its putative predictive properties. So have a look at FedEx’s stock performance over the last three years (no, stock performance is not synonymous with the company’s earnings, but I’m trying to approximate the pressure-plus-wind combination). You’ll certainly see a rise from late ‘06 to early ‘07, which presumably “forecast” the growth in the periods shortly thereafter. But you also see a pretty steep drop for almost a year, from the end of ‘04 through the autumn of ‘05. What, exactly, was that forecasting? The downturn that would rear its head two years later?

In addition, if there were macroeconomic predictive powers in FedEx’s stock performance, they ought also to show up in UPS (UPS) stock. But UPS’s performance has been dramatically different - it peaked in mid ‘06, and has yet to recover from the precipitous decline that summer. Also: Has anyone tested the thesis that shipping companies have better predictive power than, say, gas retailers or boxmakers or other providers in the shipping industry? Maybe, but we don’t hear much about their barometric qualities.

Look, everyone recognizes that business journalism needs its cliches. What would daily market writers do without stocks that “surge” when they go up, “plunge” when they go down, or “hover” when they do nothing? But those are harmless, if annoying; the FedEx-as-barometer thesis is not only lazy, it’s probably wrong, and certainly has the potential to mislead people. Let’s put it to rest.

(Barometer picture courtesy freefoto.com)

The bad news out of Starbucks (SBUX) and FedEx (FDX) has Barry Ritholtz railing about inflation again. On Thursday, Starbucks said foot traffic in U.S. stores dropped for the first time ever in the most recent quarter, as the company boosted prices to offset rising costs. Friday, FedEx cut its earnings forecasts, citing surging fuel costs and weak volume. Ritholtz wonders what other firms might be seeing the same problems and reminds us ominously that while the Fed can cut rates to its heart’s content, “there is no free lunch.”