Blah, blah, blah

head_left_image

Sometimes I am just wrong...

Fast forward to the last line of this post and you will see me swallow my foot...

Leading indicators v. Trailing indicators

I didn't think Atlanta values would drop more than a couple of points... if that.  Well... 20% later, and there is no way for me to spin it otherwise... I was wrong.  I really thought that we wouldn't see more than a 5% decline.

The rest of the post is interesting as well... simply because of the talk of leading and trailing indicators.  And that is what I want to expand on...  Leading and Trailing Indicators.

As mentioned previously, leading indicators portend to the future.  One of the better leading indicators is the stock market.  Many feel that the stock market points to the larger economy six months in the future.  Of course, there are moments when that isn't true (Earnings Season is a look backward for the stock market)... but generally, traders and investors buy stocks based on how they feel the company going forward.  Stocks tend to move on innuendo, rumor and news.  Usually, if the rumor or innuendo is good, stocks move up, and when the good news confirms, the stock moves down slightly.  If the rumor mill is quiet, and the news leads the run, then good news will push the price higher.

The opposite holds true for bad news...  If the rumor or innuendo is bad, stocks will move down in response.  The bad news confirmation will moderate the decline.  This is because the early movers take advantage of the early rumor, and then when the news hits, they are selling out or covering their shorts (buying to finish their short position).

The best trailing indicator is the unemployment number.  It won't start to creep up until well after a market has changed.  We can see this looking back to the beginnings of the current recession.  Employment remained strong until everything had already changed direction.

And, before we see that unemployment number start to fall, we will likely be well into the next recovery.

Stock and commodity markets provide instant feedback on policy and political changes.  Looking at the current cycle, we can see that both commodities and stocks have fallen sharply with the moves of the Obama Administration.  Basically, the market is telling President Obama and his team... in a pretty unified voice... that they don't think his plans will help business in America.  And while the President and many of his spokespeople are trying to paint the market losses as being a leftover from the Bush Administration, it simply isn't the case.  They don't see the Obama Stimulus Package, nor the recent actions to stabilize the markets as being effective... for the future of the businesses on the market.

On the flip side is the Unemployment Index.  The Obama Administration hasn't really been around long enough to have any realistic effect on that.  They are more of a reflection of monetary policy and the economics of the Bush Administration... until around June... then the Obama people have to start taking responsibility for those numbers as well.

The housing market is also a trailing indicator.  The economy will have certainly turned the corner to a larger recover prior to the housing market showing a change.  Many are crying out that the current financial crisis started in the housing sector and needs to be corrected there... but again, that isn't really the case.  Housing was simply another symptom of the larger problem in the economy... namely, too much spending and not enough saving... by government... by business... be individual... across the board.

When we get the spending and savings under control, we will get the economy under control.

Comment balloon 1 commentKevin Robinson • March 15 2009 09:21AM
Sometimes I am just wrong…
share
Fast forward to the last line of this post and you will see me swallow my foot… Leading indicators v. Trailing indicators I didn't think Atlanta values would drop more than a couple of points… if that. Well… 20% later, and there… more
A Bare Boned Government?
share
What are the bare bone areas that the Federal Government should involved in? The basics we want them working on with the taxes they take from us. •· Defense -Most people when asked where their freedoms come from they… more
If Only…
share
'Here's my strategy on the Cold War: We win, they lose. '- Ronald Reagan 'The most terrifying words in the English language are: I'm from the government and I'm here to help. ' - Ronald Reagan 'The trouble with our liberal friends… more
Friday the 13th News…
share
[Bull Pen News] ***Breaking news*** March 13th… Friday the 13th… According to unreliable sources, Mexican President Felipe Calderon is considering a massive spending program to fortify the US-Mexico boarder fence which has been… more
President Obama: Investment is a good thing
share
I discovered a fantastic article this morning on CNNMoney. com written by Nina Easton which explains the reasons why Obama's ideology of re-distributing the wealth is producing headwinds for a banking (and I would also add housing and economic)… more
Happy Pi Day!!
share
For those of you who are math junkies, you might already know that today is Pi Day. Pi Day is a “holiday” celebrated every March 14th (3/14). The Greek letter "pi" is the mathematical symbol for the relationship between the… more
Governmental Affairs And Real Estate Agents
share
So much is taking place these days that affects the real estate profession, that I sometimes wonder how any professional agent could not help but be concerned on more than just an emotional level with all the change that confronts the modern… more
If banks are profitable, do we need to remove toxic assets?
share
In light of Citi's CEO Vikram Pandit's declaration that his company was profitable the first two months of the year which sent traders streaking down Wall St., I have a question, does that mean the government doesn't need to spend hundreds of… more
How do you spell Corruption?
share
How do you Spell: CORRUPTION Speaker of the House Nancy Pelosi's home district includes San Francisco. Star-Kist Tuna's headquarters are in San Francisco, Pelosi's home district. Star-Kist is owned by Del Monte Foods and… more
Yet another reason to "fix" the housing market
share
Not as if the government should need another reason to fix the housing market considering the devastation it has had on the banking system and broader economy, but the latest news from Reuters about Freddie Mac losing $23. 9 billion in the fourth… more