The Economy Doesn’t Disappear, It Just Moves Over A Bit
As I noted earlier this week, there’s a chance that us stock investors will be lucky enough to see a return of prices similar to 2009. What’s funny about this is the thinking that drives the prices. The last 3 months of data apparently form a solid trend when it comes to the news. But this is just watching shadows and trying to guess what’s creating them.
I know from running a business that measuring on the wrong time-scale is just crazy. I can project that I’ll get $X in a certain month, but if one person delays a decision by a few days a substantial part can move into the next month. Am I going down just because it was a few days late? In my business a quarter starts to give me an idea of a trend and a year tells me what’s really happening.
In the real economy it’s not unusual for a large number of people to decide to delay certain types of activity such as buying a car by 1-5 years. That might make one year bad but it doesn’t make a trend because they’re adding to the future economic activity. People will have kids, grow old (so far all attempts to prevent those two have largely failed), look for somewhere to live, try to go places, eat things, and entertain themselves. They may put it off when forced to do so by extreme pressure. But as soon as they figure out a way they will continue to do it.
Most things that have an impact on the economy will affect when people do things, not what they do. Real changes take a long time to happen. And when they do they usually create demand for new businesses that can make a profit from them. As an investor I see economic news as entertainment. And you can get both better news and entertainment.