Bristlecone's Form ADV
One purpose of this monthly digest is to help clients better navigate the torrent of financial news, data and information thrown at them everyday by the internet, CNBC, radio, etc.
Indeed, the great challenge facing investors today is no longer how to find good information. Rather, the challenge is to filter out all the noise and put new information into a meaningful broader context. Not only is there simply too much information to digest, news is also frequently sensationalized and purposefully de-contextualized in order to grab attention. While easier access to investment information is clearly a step forward, we have little doubt it can also contribute to pervasive short-term thinking and exposes investors to behavioral pitfalls.
This month we wanted to highlight an internet site that is a good source of economic news and, just as importantly, puts that information in a helpful longer-term context. We are not economists, and we don’t expect our clients to be, but we thought you might find this site useful in understanding what you hear on the news. The site is called Calculated Risk; take a look at these two posts from this week.
Weekly Initial Unemployment Claims Decline to 366,000
This figure is reported each Thursday and has been in the news regularly due to the prolonged employment slump. The post summarizes the key figures, but it also includes a chart showing the history of the figure for the last 40 years. From that, you can quickly put the 366,000 figure in proper context, well below the 600,000+ weekly claims at the height of the recession and not too far from the average over the last 40 years. That’s a good sign that the broad labor market is currently showing improvement. Elsewhere on the site (All Employment Graphs) you can quickly see how severe recent job losses were and how they compare to prior recessions.
Fed: Household Debt Service Ratio Back to 1994 Levels
Another headline that caught our eye this week related to household debt service levels. High consumer debt was a key cause of the 2007 – 2009 recession. Reducing that debt has been a key headwind slowing the recovery. So it was interesting to see that some progress has been made toward reducing the amount the typical household has to budget to paying off debt. One big cause of this is rock-bottom interest rates; another is that lots of bad debt has been written off by lenders. But this news shows that American households are working toward getting their household budgets in order.
Together, these reports paint a picture today of a recovering economy, and indeed some economists have recently revised upward their GDP growth projections. It is important to remember, though, that these data only reflect current trends and are in no way a forecast of the future. Both laymen and economists have a poor record of forecasting, but that doesn’t diminish the usefulness of having a better understanding of the context and history of these numbers.
We at Bristlecone appreciate your trust in our services over the course of 2011 and we wish you and your families a wonderful holiday season.
Tags: Economic Data, Favorite Sites