If you wait for good news you may be too late. What do I mean by that? In many economic swings there are points where things fairly quickly get worse or points where they fairly quickly get better. At some point these changes are obvious to everyone. However, the ability to predict or at least recognize these points early can be critical to how much you can avoid losses and/or maximize gains.
Right now there are a number of leading indicators that indicate that we have reached the bottom. The indicators are a slowdown in falling real estate prices, slowing of unemployment claims, increased consumer confidence and reduction of inventories. Of course a one or two month improvement in any of these indicators can be a temporary aberration.
A more telling indicator may be what the experts are saying. Around the beginning of this year it seemed that every expert I read said we were in for a long and prolonged recession, that at best would last into the last quarter of this year and maybe much longer. That’s when I started to get optimistic and go long on some positions. I’ve never held much confidence in consensus predictions, or alternately, I’ve mostly had a lot of confidence that they were wrong.
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