Trade The Journey

Trade The Journey

Economic Slowdowns!

Don’t for one second think that an economic collapse can’t happen again. We have been experiencing good times for a while and the good times never last forever. Although the Federal Reserve and the government would do everything in its power to ensure that it doesn’t happen, it has to happen. We cannot escape the business cycle. because what goes up must come down. What is of most concern is the seriousness or severity of the downturn. Often times the thought of  a recession may cause people to panic. If people start to panic you could see the effects of it everywhere, as money becomes harder to get and less of it is available to lend at low-interest rates because banks are not sure if their receive it back. The money supply begins to tighten.

There are a lot of people who claim to know when the market is going to collapse but it is almost impossible to predict when. We are months behind identifying where the economic cycle is and often times to slow to identify where it is going. Very few people have the talent of accurately estimating where the economy is going consistently. They say that great investors have seen so many cycles that they develop an intuitive idea of where the economy is going.

“Economic Slowdown- people put off buying large items, stop spending altogether, they begin to hoard money in their bank account and money flows decrease around the system.” Book of Money

Here are some signs that the economy may be slowing down.

  • Are there a lot of new cars on the road?
  • Are the majorities homes in your neighborhood being sold quickly or are they selling slowly?
  • Are people making large purchases, confident they are able to pay it off using credit/loans?
  • What are people you know doing with their money, especially the middle-class?
  • Do you see a lot of for-hire signs?
  • Do you notice a lot of construction projects beginning?
  • What kind of interest rates are banks offering?

These are some of the things we can pay attention to, to make a forecast of where the economy is going. These are known as economic indicators. I am sure you can find a number of books on economic indicators with different strategies on observing how the economy is going. By at least making a prediction, you’ll have the opportunity to prepare for changes in the economy. One thing, I find helpful to know is that money is constantly flowing through the economy and a rise or decrease in the flow will alert you to changes that might possibly indicate where the economy is going. It took me a while to fully the grasp that the economy and money are constantly moving based on policies set in the government and where the public thinks the economy is going whether based on facts or not.

If you watch the news, try to think past what is being shown by the news. Try to add a second level to your thinking and begin to add different scenarios that can occur based on current events. For Example, if oil prices are rising and that means higher prices at the gas pump, would you travel more or less? If everyone is driving less, that means they begin to spend less and I think you can figure out what happens from there.

Thoughts?

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