Leads And Lags

Finance Allah shmoop what are lagging and leading economic indicators

Okay people Here's the economy kind of roller coaster ups

and downs and well but it generally goes up overtime

anyway More people more demand for toothpicks Ah bed sheets

hair growth formula You know that one really worked more

buyers of a one bedroom with a view of another

one bedroom with a view of Well yeah Wall Street

people and economists Yeah Those guys are always trying to

figure out where we are in these roller coaster cycle

ups and downs Are we here Are we here Are

we here Yeah very Carmen Sandiego So a leading indicator

is basically the canary in the mine shaft And if

you don't know the term Pita stopped this But it

used to be that miners would literally bring Canaris with

them into mine shafts Because canaries if they live to

tell the tale are extremely sensitive to gas Ah different

gas when there would be any kind of harmful leak

like from gas lanterns or from diesel engines or from

fissures in the earth while the canary would die quickly

or at least stop singing And then the miners would

skied addle out of there So the canary was the

leading indicator of a deadly gas leak and miners would

follow it awful Investors are always anxious to figure out

what leading indicators air saying about where the economy is

going Investors kind of live two quarters in the future

And if they believe we'll have a meaningful slowdown in

the economy while they'll usually begin selling well ahead of

them that is The economy or belief in economic growth

is a leading indicator often of where the broader stock

market is heading for the stock market generally anticipates the

economy well One famous canary no longer really in use

anymore are help wanted lines in the newspaper And yes

once upon a time those things were on paper way

before the founders of Glass Door indeed and the others

were even well invented are born so help wanted lines

were a leading indicator of the economy If they were

shrinking the economy was likely to be softening as demand

for incremental new hires was dissipating And I went the

other way too So today we look more often it

things like bond yields albeit with skepticism because the Fed

can raise and lower bond rates for a variety of

reasons defending the dollar internationally like they'd raise rates to

do that or with political back pressure well they might

lower them to give the stock market a chance TTO

walked upwards ahead of an election Lower rates mean lower

bond yields thus making things like equity Dividends are much

more attractive means of raising cash to you know pay

the rent Well new housing starts for another big leading

indicator volatile space But if the smart people of the

world are green lighting loans for builders to build new

homes well then a whole lot of people believe that

the demand will be there for those homes when they're

finished a year or two or three later Okay so

those air leading indicators what are lagging ones And why

would we even care about a lagging indicator like a

lagging indicator of your death Is well worms eating your

body And you really just not caring what lagging indicators

really service a truth telling mechanism to see if we

got our leading indicators right That is a lagging indicator

might tell us that we've just finished a big economic

boom and a really five quarters into a sort of

soft recession as we see declines in profits from gate

fees at Disneyland and Disneyworld And we might see unemployment

rates going up at an active clip And we might

see interest rates following with the governor hoping the stimulate

economic activity again Well all of these indicators however only

exist in a weird kind of vacuum because so many

cities and even states really have their own financial ecosystem

Economically speaking right Well the planet called Silicon Valley over

the last couple of decades has generally grown like a

bamboo chute on hot sweaty days with only blips of

economic cyclicality Other areas like Detroit and Central Baltimore can't

seem to grow no matter how much stimulus the feds

apply The key takeaway as with any economic indicator is

that real investor type Wall Street people really don't care

all that much about what theater economy is doing when

they put money to work for their clients And after

all while those economists were PhDs need at least something

to do with their time So you know why not 00:04:10.769 --> [endTime] opine on lagging and leading economic indicators Oh