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Rule #1 - Do not lose money! Rule #2 - Never forget rule number 1! ( by: Warren Buffet )For comments or questions please email: : admin@equityresearch.com |
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Leading Economic IndicatorsLeading economic indicators help economists to predict the future outcome of the economy. They are called leading because they can predict a recession or a recovery. If you are in investor, it is good to know the leading indicators because it will signal to you when to get back into the market while prices are low and before stock prices increase. If you want to know what the economy is likely to do, in the future, it is a good idea to look at the leading indicators.What are the leading indicators?There are ten main indicators. They are put out by The Conference Board Leading Economic Index. Here they are.1- Average weekly hours worked by manufacturing workers. 2- Average number of initial applications for unemployment insurance. 3- Manufacturers new orders for consumer goods and materials. 4- Manufacturers new orders for capital goods unrelated to defense. 5- Speed of delivery of merchandise from suppliers to vendors. 6- Residential building permits. 7- S & P 500 Index 8- Inflation Adjusted M2 (money supply) 9- Spread between long and short interest rates (yield curve). 10- Consumer Expectations. The Conference Board puts the indicators into a composite index to show the overall health of the economy. You can see the worldwide index here : http://stats.oecd.org/Index.aspx?DataSetCode=MEI_CLI Other Leading IndicatorsThere are many theories and many different leading indicators. Alan Greenspan likes to look at men's underwear sales because the sales are normally very flat and when you see a positive spike it is a sign that a recovery is underway.Whoever wins the Super Bowl in another indicator. If the AFC wins, tough times are ahead. If the NFC wins, times will be good. Coupon clipping tends to go up during bad times and is another indicator of how people are feeling about the economy. Hot waitresses. The theory is that during recessionary times employers get better choices of workers and so waitresses beauty trends upward. The other factor is that models that can't find work tend to work as waitresses. There are many ways to predict things. The important thing is to think about what people do when times start getting tough. Then, research the information to see trends. This will give you a pretty good idea of where the economy is going. |
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