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Wednesday, Oct. 22, 2014

Economic mysteries are hard to unravel

Friday, March 5, 2004

Just for argument's sake, let's assume that most of us are walking in a fog when it comes to the national economy. And why shouldn't we? You can read and listen and analyze the state of the economy and come to absolutely no agreeable conclusion. Well-respected, honest, trustworthy, intelligent economists disagree on virtually every aspect of the economy. So what are you to believe?

Here's the irony of this situation. The national economy will be at the center of the presidential elections this year as is often the case. And most Americans are justifiably more worried about their pocketbooks than about the threat of terrorism. Let's hope that fact is not lost on President Bush as he faces re-election. But regardless of the political party, the bottom line is that more of us want to be able to understand the bottom line. We want some common sense advice on how to wind our way through this economic maze and we want some sense of where our national economy is headed so we can then adjust our lives to meet those expectations.

Which brings up the point of today's column. By way of background, each month some of the most respected financial minds in America gather and look into a crystal ball to forecast what lies just ahead on the economic front. Every aspect from employment to industrial output to retail sales and trade are analyzed by these experts who have the most detailed information available at their side. These are the experts who tell us where we are going economically and how we should prepare accordingly. And more often than not, they're DEAD WRONG. (I put the capital letters in there so you could realize I was shouting this conclusion)!

Yesterday with much flurry, the retail sales results from February were announced. These numbers are extremely important because they gauge spending patterns and give a sense of the financial status of American households. In short, the February numbers were astonishing. Sales were unbelievably strong across the board. We Americans are indeed spending like drunken sailors on shore leave and that is a fairly good sign that most household finances are in decent shape.

But when compared with the analysts' predictions, the experts bombed again. If you look at the "expert" predictions for Wal-Mart, Target, Gap, Talbots, Limited Brands and Federated, the experts were off by hundreds and hundreds of percentage points. They didn't just miss the boat on these predictions, they fell flat on their faces. Again! Most of the retail giants were twice as strong as the experts had predicted. Some were even higher than that. In short, despite the moderate predictions, Americans fooled the experts once again.

The point of this is a simple one. When the best minds in the business can't get it right, how are we humble credit card users supposed to plan for our financial future? If these experts had come close on their predictions, that would have offered some level of comfort. But these guys are operating in the dark and they are the best in their trade.

Don't feel bad if you lack a true understanding of simple economics. Apparently you're not alone.



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