Whose Crystal Ball Will You Believe?

On Monday the news headlines were loaded with statistics that are supposed to indicate the health and future of our economy. While many news media reported sad results in home sales and continued slumping in the job market other forecasters seemed to be saying that the outlook is good. The confusion of mixed messages only compounds when we look at single segments of the market indicators.

Yesterday (Oct. 25, 2010) the Huffington Post flew the American flag upside-down on it’s home page (shame) in response to news that they believe proves the economy is still failing. The news they were responding to was: 1) new home construction continues to fall, 2) the foreclosure market is a mess and big banks are again blaming consumers, and 3) unemployment continues to rise. This is bad news, but on the other side…

USA Today was practically singing “Don’t Worry, Be Happy” as they posted the results of their own IHS Global Insight Economic Outlook Index. Like any reasonable economic forecasting model, the IHS doesn’t only look a few sectors of the economy. The index reviews 11 key areas. USA Today’s IHS revealed the following:

“Four of the 11 indicators were positive in September, half the number in August. Although the number decreased, these indicators were strong enough to offset the negative indicators.Positive indicators include hours worked, the real money supply and stock prices, all of which increased. Also positive was a decline in the real federal funds rate. This model assumes it can take 12 to 15 months for changes in the real federal funds rate to affect economic activity, so it uses the January 2010 — March 2010 rolling average to forecast real GDP in February 2011.Negative indicators include declines in building permits, real capital goods orders, ISM export orders, the yield curve and light-vehicle sales. Also negative was an increase in seasonally adjusted crude oil prices. The AAA corporate bond spread was neutral.”

Okay, 4 out of 11? If all the indicators are weighted equally, is this as good of news as they present it to be? I don’t know, maybe or maybe not.

Meanwhile, looking locally, we saw that Denver area unemployment rose slightly and home sales declined slightly.

And so the Monday of October 25, 2010 continued like this across all media. It was good, news bad news day.

When it comes to predicting the economy, it often seems that the bearer of the news will manipulate the data depending on how they want you to feel. If they want to make you mad, they’ll fly the flag upside-down and tell you that we are all doomed. If they want to make you feel good, they’ll tell you that 4:11 are odds that you should place your bets on.

To really prepare yourself for the future you need to look at your own personal economic forecast.

1. Be informed regarding the economy of your job.

2. Know where your company stands in the market and how you may be affected.

3. Pay attention to your home and property value.

4. Watch your spending.

5. Reduce your debt.

6. Follow the progress of your retirement accounts.

7. Balance your budget.

In other words, look out for #1: you and your family. Let the forecasters chase their own tails. Do take a wide-angle view of your personal economic situation by looking at many factors. Don’t just focus on debt or just on your job. And remember, you have professionals at-hand that can give you help make decisions based on your personal economic outlook. The Investment and Retirement Center Team are available just for you.

To arrange your no-cost consultation, call the Investment and Retirement Team at (303) 279.6414 or (800) 770.6414 between 9:00AM and 5:00PM Monday through Friday.

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