Which Indexes to Watch

Which Indexes to Watch

Reading the Economist, listening to NPR or CNN, one is deluged with numbers from indexes. There is even an index of leading economic indicators. Is that something like the National Association of Associations? Anyone who has ever traveled to a developing country knows that the information in these indexes is either totally erroneous or simply “plucked from the air”.

In the USA we have a yardstick called the consumer price index. This started out as being a total cost of a “basket” full of items. The government uses this to determine how much to increase payments under entitlement programs. It is in the best interest of the Government to keep the increases low. They have determined that tying this index to a “fixed” basket of goods is not as valid because if something in the basket gets more expensive, a prudent consumer will buy something else. In other words if the price of filet mignon goes up, people will make do with chitterlings. Sometimes I hear on the radio that inflation last month was low except for food and fuel. How long does anyone go without buying food or fuel.

The most relevant index for everything in my estimation is the consumer confidence index. The performance of the stock market, real estate prices, currency exchange rates and everything else in the economy is tied to fear or confidence in the market place. The problem with the consumer confidence index is that it is based on surveys and numbers. I think a better confidence index would be to take everyone’s blood pressure and base the index on the average change in blood pressure. Since this index is unavailable I have another one I use. I call it the “Lunchette index”. It is not very scientific and it doesn’t have a numerical number for reference. I go to lower to middle class eating and drinking establishments and listen to what people are complaining about. If people are complaining about the food or their job or the government, that is good. If people are complaining about prices or taxes, that is not so good. When people are complaining about their family relationships, they are under severe financial stress.

David Segrest is a REALTOR in Charlotte NC. His website is http:www.segrestrealty.com .