Saturday, February 16, 2019

Indicators for the Real World

Often, there are indicators or warning signs before "something" happens. Sometimes they are unrecognized and sometimes they are misinterpreted. Sometimes they are ignored.

The US economy has all sorts of measures applied to it that become information from which "indicators" are built. Some are considered "leading indicators", meaning they presage some development. Others are "lagging indicators", where the information they bear can only be interpreted after the event has happened. Then we have "coincident indicators", which, as you might guess, occur during the event. (If you want some more information on indicators, Investopedia has a short article on them.) Bear in mind that these indicators are relatively academic in nature. They aren't things we can easily see around us. Because of their nature, they're often of limited usefulness to individuals, and as a result, many people simply ignore them for the most part.

I think it's important for each of use to develop our own list of real world economic indicators. It's just another sort of situational awareness. Like politics, the economy is interested in you. Unlike politics, it has near immediate effect on your life.

Charles Hugh Smith, one of the economists I follow, has a post on the "Telltale Signs of Recession". He concentrates on looking at more real world indicators versus the more high-flying indicators that most economists look at. Use these as a starting point for developing your own personal list of indicators that you monitor. Use what you see and deduce from your indicators to know when "something", good or bad, is about to happen.

Ignorance is not bliss.