April 10, 2008
In the beginning of 2007 I warned
everyone that a major recession was on the horizon.
I advised all of my clients to move to cash, and begin a
proactive approach to investing. In the middle of
a Bull Market, I was Bearish Long Term.
Intelligent as hindsight may make some of the naysayers
think I was, I was not and am not using rocket science
to make my determinations; in fact, quite the opposite.
I Keep It Simple, while others Make It Complicated: KISS
vs. MIC.
Now that the recession has begun
every economist in the world wants to explain it.
They want to tell us the reasons for the recession, what
needs to be done to avoid a depression, and how long it
will last. They are using tools that they were
taught in school, and that economic circles have come to
embrace in years past. Oil and Interest Rates are
obvious catalysts right? The falling Dollar is a
culprit too, most would have you believe.
But I'm not part of that camp.
Sure, we can show relationships between thousands of
economic variables, these just being a few of them; but
what happens when Economics is put through the lab?
What happens when we skim the fat, or boil away the
noise and get to the root of economics again? I
guess the first question is: can we?
For some Economists, getting back
to the basics will require a retreat to La Costa where
they can listen to Deepak Chopra speak of spiritual
healing. Most Economists just can't see the forest
despite the trees, and they need a kick in the pants to
open their eyes again. It's right there in front
of them, the basics that is, but the noise that they
hear every day, and sometimes the direction given them
by their corporate directors cloud their ability to take
Economics back to the lab, where the real work gets
done.
The ultimate question is: What
Drives the Economy?
The answer to this question is
what differentiates KISS and MIC. MIC would have
you believe that an interrelationship of a multitude of
variables can predetermine the health of the economy and
explain current and future economic conditions.
Sometimes these variables change, and sometimes these
variables are constants in their respective models.
The takeway is: 'MIC Economists' all have different
models, with different variables, but at the same time
they all have the same common goal too.
KISS weeds out the noise, and this
is my approach. What really matters to the economy
after we boil away the fat? In addition, what
common trait do all of these 'MIC models' have?
Finding the root provides more insight to the questions
we have about the economy than the convoluted models
mentioned above ever could.
What Drives the Economy?
The answer is simple: PEOPLE.
People are what matter to the
economy; more importantly, the spending and investing
patterns of people drive the economy. In College I
was bored with Economics. It came easy, but there
wasn't a challenge for me until one of my professors sat
me down and told me that 'Economics is all about
people.' He said: 'if you know people, you'll know
economics.' I took that to heart, and found
economics a compelling subject from that pint forward.
Thanks Stan!
Since then I have embraced people
from all walks of life. I have taken the time to
learn about 'people' and about how they spend and invest
money. I intermingle every day of my life. I
am the guy at the cafe wearing camouflage pants and a
hat on backwards listening to the conversations around
him, every minute absorbing the macro thoughts of the
Economy, of the people, observing, and recording.
When Economics is brought back to
the lab, the end result is exactly this: People drive
the Economy Longer Term, the rest is noise. Sure,
the economy has grown, it has become global, and it now
appears much more complicated than ever before, but it
isn't! Imagine me screaming at the top of my lungs
as I write this article:
"STOP COMPLICATING
THINGS!"
Economics is a simple science if
you let it be, and that is what I have done with my KISS
- oriented model. My long term Economic Model is
called "The Investment Rate." It measures the
lifetime investing patterns of people. Since 1900,
backdated, it has successfully predicted every major
economic and market cycle in advance.
The Investment Rate is a leading
indicator; in fact, 'The Investment rate is the Most
Accurate Leading Longer Term Stock Market and Economic
Indicator in History.' It simplifies the approach
to Economics by focusing on the investment patterns of
people, and it reveals future economic cycles clearly.
It told us exactly when this recession would begin, and
it tells us exactly what to expect from the future.
If you want to know where the
economy is headed, if you believe that economics is all
about people and what they do with their money, then you
need to read the Investment Rate too. We have a
copy on our website.
Good Trading
Stock Traders Daily
http://www.stocktradersdaily.com
1.866.213.2067
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