Economic Analysis

Economic analysis is the systematic approach to help determine the most optimum use of resources.

Most people look to one of two things to detmine what our economy is doing, and thus draw conclusions on what the future holds.  While in text books, economic classes and the hallways of bank and brokerage firms this may be an accepted meathod of forecasting, with me, not so much.

You shouldn’t care what the ecomimists are saying because the majority of time, they all make forecasts in concert with each other, this way, they’re either all right, or all wrong with a the same excuse.  If you pay attention to their writings, they resemble political talking point.  There really is no accountability for an econimist because she is really just interpreting flawed government numbers.

Speaking of Government numbers, this is the second way (or first way for some) to determine what the economy is doing.  Again, the numbers are typically flawed, late and adjusted for months to come.  Most people who follow the markets believe the stock market follows the economy, and that is generally why they pay such close attention to the employment numbers, Gross Domestic Product (GDP), inflation and all the other fancy government numbers.

In reality the market will tell you what the economy is going to do.  Therefore, if the market is a leading indicator, why would you pay attention to the economic numbers when certain stocks or sectors will provide a great indication of what is coming next.

For example, if you see stocks like Wallmart (WMT), General Electric (GE) and JP Morgan Chase (JPM) begin to act a certain way (not necessarily all together, but one or more can be a tip off) then you can look deeper at other indicators to assesss the probabilities of your forecast.

The main theme is that technical chart analysis of almost any market can give investors and traders a leg up on the mainstream heard.

There doesn’t seem to be any way to leverage the published government numbers into an investment with a high level of success.  As such, what reason would you have for looking at them.

Some of the economic indicators of importance are as follows:

Consumer Price Index

Durable Goods Orders

Employment Numbers

Existing Home Sales

FOMC Forecasts

FOMC Meeting Minutes

Housing Starts

ISM Manufacturing Index

Gross Domestic Product

and a whole host of other data sets that you can get lost trying to figure out what they all mean.

Take a look at economic analysis from another perspective as a comparative measure.


Economic Analysis of the Solar Industry

Stanford University

Stanford Graduate School of Business

Emmett Interdisciplinary Program in Environment and Resources

Stanford University Channel on YouTube: