Are markets a leading or lagging indicator of the economy? That’s what the echo chamber is debating this week. Myself, I don’t care too much either way – and neither should you.
The point of participating in the markets is to preserve and grow one’s capital, at a rate substantially higher than the rate of increase in living expenses. There is absolutely no need for economic study, in order to perform this task. There is most certainly no need to “time the economy” in order to make money in the markets.
Everything one needs to successfully trade the markets is contained in price, volume, sentiment, balance sheets, cash flow statements, etc. A well-designed technical, fundamental, or fundatechnical trading system will keep one on the right side of the economic trends, without having to expressly worry about what those trends are.
Other than doing a few economic posts to correct egregious errors like using the U.S. Dollar futures contract for economic analysis, or to teach the “economists” how to properly calculate the impact of house prices on the economy, I don’t see much use for economic analysis. Yes, I have had some weak moments, similar to looking at the magazines near the checkout counter, but by and large I don’t write about the economy for two reasons: first, it bores me, and second, it’s a useless endeavor.
Forget the economy. Focus on the markets. Find a methodology or system that works for you, and stick with it.
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3 Comments
Interesting article re: throwing the economy and caution to the wind and really just concentrating on the market itself. It’s interesting in this current environment of panic over the economy and pending ‘recession’ (if there is one) that someone finally spoke up about separating the economy from the stock market. Cool stuff. I’ve read some similar articles at fisher-investments.typepad.com - they’re fairly anti-recession and have a bit of a different spin on things.
Glad you liked it. Keep in mind, it’s not throwing “caution” to the wind - it’s focusing on what’s important and necessary to successful speculating in the market, and putting what’s unnecessary and unimportant, that is, the “ECONOMY,” in its proper place.
Bill,
Right on….you nailed it on the head.
Jeff