In Retrospect – June 2018
“I have always managed my own money, even when I didn’t have any.”
Teri Frisch
In Retrospect
Newsworthy or Not?
If you had to pick one news publication or one news station to watch, what would it be? I am guessing not a financial newspaper or network. I worked in an environment where we were surrounded by the constant “news” from CNBC, Bloomberg, and other financial news networks. Years ago, when we expected a newsworthy event we would all stop and gather around the screens, anxiously waiting for an announcement. The newsworthy events typically centered around the release of economic data. Otherwise known as economic indicators. How fun is that?
If you are “in the markets,” meaning you are investing, how important is the daily barrage of news? Should stories you hear in the news impact your investment decisions? Are there sound investment ideas you can act on?
I would say no. No because in the investment world, all news is old news. There is no “new news.” The media uses a lot of hype to make everything you hear sound urgent. Act now!! Don’t miss this opportunity!! You can get sucked right into believing that what you are listening to demands immediate attention. If you don’t pay attention some great investment opportunity will be lost. Just not true.
As an investor, tuning out all of the “noise” in the markets and media will serve you better in the long term. If you are watching the news, an idea for an investment could be something as simple as an interview with a CEO. Investing is about the future. If you are interested in a specific company, read about it. Buy a few shares. Take a little risk to start. Most of all, don’t pay attention to the ongoing sense of urgency and messaging that says you are missing every good investment idea on the planet.
One Economic Indicator
What is an economic indicator? Do I care about economic indicators?
The way I think about economic indicators, is that they tell me how people live. It is interesting to me that during major election cycles, when someone is asked what their biggest concern is, they are likely to say, “the economy.” Most of the people I know hate economics and have never taken a course in economics. This doesn’t stop anyone from having an opinion about the economy.
Economic indicators give weight to a discussion on the economy. What money managers tend to focus on are economic indicators that have the power to “move the markets.” Economic indicators are referred to as “leading” or “lagging.” It is the leading indicators investors focus on.
One of the “biggies” is the employment number, also called the jobs report. Are people employed? Do they have more money to spend? The jobs report is considered a leading indicator because it has predictive value. The information in the jobs report can (not saying it will) help forecast future economic activity.
The Bureau of Labor Statistics (BLS) releases the employment numbers monthly. The most recent report for May stated that “the unemployment rate edged down to 3.8 percent.”
Taken at face value this means that 96.2% of the working population is employed. That’s good. When people are working they are spending money, business thrives, the economy grows, the stock market does well (theoretically of course).
Interested in the data? The Bureau of Labor Statistics has it all: www.bls.com
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