How To Figure Out What's Next For The Economy In A Few Easy Clicks

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If you haven't started investing yet, these tips will help get you on the right track for retirement. USA TODAY

Ken Fisher(Photo: Fisher Investments)

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Headlines scream endless economic fears, always. 

Recently, The Weekly Standard screamed, “Are We In for Inflation or Recession?”  WardsAuto, a trade publication blared “U.S. Sales Plunge Ahead.”  In Seeking Alpha's headlines there was, “A Recession Could Be Coming.”  While the venerable Wall Street Journal published: “Why Soaring Assets and Low Unemployment Mean It’s Time to Start Worrying.”   

Worried yet?

Endless studies show professional forecasters’ predictions are wildly useless. But there is hope for anyone who wants to get a handle on what is ahead for the economy.

You can out-foresee them and do pretty darned well with an easy-to-use tool. It’s no crystal ball. But it’s as close as it gets.

Say "economics" and eyes glaze over, quite rightly, from mind numbing jargon and useless data. Much just details what already happened.  You want to cut through the clutter. 

Hence, discover: the Leading Economic Indexes (LEI).  There are 14 total—12 major countries plus two regions. Get them all by Googling, “Conference Board LEI.”  

Used super simply they work well.  Each combines one country’s most forward-looking statistics — details you don’t need.  You needn’t know our  U.S. LEI, the oldest (since 1959), includes building permits, three measures of factory orders, new unemployment claims, consumer expectations, hours worked in manufacturing, stock prices, a credit market snapshot and the interest rate spread (long-term minus short-term interest rates).  You only need know if it’s high or not and rising or not. I’ll show you how down below.  It’s easy. But said simply: no US recession ever began while LEI was high and rising. LEI always fell for many months first.  Today, US LEI is high and rising to heavenly perfection and a great time to learn how to use this worthy tool.

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No one of LEI’s components rules. They’re each a piece of a complex puzzle. What counts are the components combined.  Together they tell the tale.

My forever-favorite is the interest rate “spread.”  It foresees if firms can access money to fund basic business and future growth. Since banks borrow at short-term rates and lend at long-term rates, long-rates minus short-rates predicts future potential lending profitability. After spreads rise, banks increasingly lend, financing firms….and maybe even your own your dreams. But it, too, is just one indicator.  

What you should do is focus on the whole index. If Googling Conference Board LEI doesn't take you directly to the latest report, at the website’s home page click on “U.S.” and then on “Press Release” in the U.S. page’s upper right. Scroll down to the chart.  If our LEI exceeds 105 and rose the last three months, like now, we’re golden. Easy peasey!

If it's below 105 and rising for three months—we’re turning from a bad corner upward. But if below 105 and falling for months on end--expect scary evil free-fall times ahead.  

America accounts for only 23% of the value of goods and services created globally. We wiggle the same direction that other 77% does—always. Sometimes more. Sometimes less.  To confirm our economy's path, eyeball foreign LEIs.  Each country's LEI is appropriately a dash different. Click on any country (on the U.S. page’s upper left). See the chart showing if it’s high and rising or not.  If most big countries are high and rising, like now, it's super-clear sailing ahead.  These LEIs will fall together for months before any U.S. recession. Simply, no recession in big economies has begun when most LEIs were trending up. 

So rather than fretting about what others predict you can now predict for yourself.  Free yourself to worry about activating your dreams and not the fears of any prognosticator. LEI is the stuff dreams become realities from.

 

Fisher is the founder and executive chairman of Fisher Investments. An author of 11 books, four of which were New York Times bestsellers, he is No. 184 on the current Forbes 400 list of richest Americans.

 


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Source : https://www.usatoday.com/story/money/columnist/2017/07/17/how-figure-out-whats-next-economy-few-easy-clicks/479617001/

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