YABBUTS: “Yeah, but…”

27 10 2009

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By Jon Castle, CFP®, ChFC®

I got up this morning and turned on one of  the financial pornography channels as usual.  I won’t say which one it was, but, as a financial advisor and wealth manager, I usually begin my day with the financial news shows so I can have an idea of what is going on in the world of finance before I show up for work.

All I can say is… What Drama Queens!  I have never seen a bunch of highly intelligent, highly educated people whining and crying and “oh, the sky is falling” as I have today.  They had one guest host on there who had the unmitigated gall to suggest that our economy is slowly recovering, and that things were getting better – and that is why the stock market is up 60% since March and will continue to rise, with corrections and breaks over time, as is normal – and you would have thought that this person just committed some sort of blasphemy and should be burned at the stake!

YABBUTS.

“Yeah, but… the market dropped so much.” 

“Yeah, but… unemployment is down and how can the economy get better until unemployment is fixed?” 

“Yeah, but… the government stimulus packages are just about over and that put in a false bottom and now we will fall off the edge of the universe as we know it!” 

“Yeah, but the consumer remembers the recession and that will have an effect on what people buy going forward… ie, nothing, ever ever ever again”

“Yeah, but the dollar is weak and getting weaker.  No one really knows what that means… but is sounds scary so we better harp on it for a while… inspite of the fact it could totally reverse the trade gap and end outsourcing of jobs to other countries… we better monger up some fear cuz a weak dollar sounds… um… unpatriotic.   Doesn’t it?”

I have not heard so much Chicken Little since last October and honestly, it turned my stomach.   It reminds me of these fear-mongering authors who write a new financial gloom and doom book every 5 years or so, just to cash in on the conspiracy theorist market who will buy their books.

One would think that such learned gloomy economists would stop and realize that some economic indicators are “leading indicators” and some economic indicators are “lagging indicators.” 

Leading indicators (ie – indicators which PREDICT the direction of the economy) are things like stock markets, interest rates, bank portfolios, and corporate earnings predictions.  So, for example, if the stock market has reversed course and headed sharply up over a period of several months, along with very low interest rates, bank portfolios that are not overextended in loans, and companies currently reporting low earnings but predicting better earnings next quarter – those are forward-looking events and would tend to suggest better days are around the corner.  Oddly enough – that is just about ALL the economic data that is out there right now.

Lagging indicators, on the other hand – such as commodity and home prices, inventories, and unemployment – basically tell us where we HAVE BEEN – not where we are going.  So, if businesses have been laying people off, or home prices have fallen significantly, these indicators are primarily a symptom of economic conditions, not necessarily predictors of where we are going in the future.  Thus, they are known as lagging indicators, as they LAG the real economy.  They may get worse – but they do NOT PREDICT the direction of the economy – the leading indicators do.  Thus the term:  LEADING.

Again, I am amazed at how supposedly learned economists can think that unemployment somehow drives the stock market.  How can a lagging indicator possibly drive a forward-looking indicator?  People invest for the future, not the past.

Which brings us to the crux of the issue:  Lack of faith.  There is so much Chicken Littling and YABBUTTING… by these supposedly learned economists and professors, whom I’m convinced live their lives in tiny little rooms doing nothing but armchair-generaling and writing about other people’s actions, that they are missing the truly wondrous events literally unfolding before our eyes. 

Most economic growth is created when mankind, whereever he or she may be – creates something new out of necessity or invention, or adapts previously unused techniques or technology to increase productivity – or starts a new business or idea because they don’t have a job – and, in doing so, creates new jobs and opportunities for society as a whole.

What new and previously unthought of inventions will be released next year? 

Did you know that there is a company that is releasing a mind-controlled video game – before Christmas of this year?!  Whether or not it makes any money – can you imagine the applications of this type of technology? 

Did you know they are building spaceships to replace the “aging space shuttle fleet?”  I remember when the space shuttle was new!

Did you know that the world’s total knowledge base doubles an estimated every three years?  TOTAL!  Wow.  That boggles the mind.

Did you know that the major drug companies, according to Time Magazine, are spending $600,000 per day to support healthcare reform?  Someone, somewhere must think its pretty good for somebody’s business for it to go thru – and that will likely mean JOBS and economic growth.

Whether it will or not, who knows.  Not you.  Not me.  The free markets will decide.  Either way – humanity – and America – will survive.  Betting against humanity has been a bad bet for thousands of years now, and I’m not ready to start anytime soon.

And these perma-bear economists sit in their office… looking at yesterday’s data… yeah, but… yeah, but…  yeah, but…

Get a real job!  Better yet – start up a business and give someone else one!

This blog is for informational purposes only.  This is neither an offer to purchase nor sell any securities.  All investing involves the potential of loss – including invested principal.  Indices quoted are general barometers of security price movement.  You cannot invest directly in an index.  All information is obtained from sources deemed reliable but not guaranteed.  Past performance is not a guarantee of future performance.  No tax or legal advice is given nor intended.

Certified Financial Planner Board of Standards Inc. owns the certification marks CFP(R), CERTIFIED FINANCIAL PLANNER(tm) and federally registered CFP (with flame logo) in the U.S., which it awards to individuals who successfully complete CFP Board’s initial and ongoing certification requirements.

Investment advisory services provided by PARAGON Wealth Strategies, LLC, a registered investment advisor. 

10245 Centurion Pkwy. N. Ste 105, Jacksonville FL 32256   (904) 861-0093

www.WealthGuards.com

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