This morning, I watched a video clip by Jim Jubak about creating your own economic indicators. This idea made perfect sense to me. When I was in the restaurant business, I could tell where the economy was headed based on the behavior of my customers.
It is because of that fact that I say that the economy has been in trouble for a long time. We only recently officially declared a recession. But from the ground floor, the recession has been here for a long time.
The economy started to look sluggish before 9/11. I was already cutting loose employees because sales were down. Then 9/11 happened; and in the space of an hour, the economy jumped to what it was going to be two years in the future. And from where I was sitting, it never actually recovered (official numbers say differently; my customers would have disagreed).
I was using this personal economic indicator, as well as the rent and house prices in my neighborhood, to time my own personal entry in the real estate market. I knew that based on those indicators that we were in a housing bubble. My wife and I brought our house when the prices softened.
Personally, I wanted to wait longer until the bubble broke, but I could not afford to. My rent was going to go way up if I stayed in my apartment another year; as it was the rent on two apartments (me and the wife were only engaged at the time and living in separate apartments) and the art studio was the same amount as the mortgage payment we ended up with.
And in hindsight, the timing was right (despite the fact that we currently have an upside down mortgage): little did I realize that the economy was going to go so far south that I was going to lose my job and end up in college to earn a degree while the economy recovered. Fortunately, we brought a house that we could afford if one of us had employment difficulties (though I admit that I thought it was going to be her and not me).
But those of us on the ground floor saw it coming. As Jubak points out the official numbers are boiled and diced (my description, not his) and become misleading and confusing. So I agree with him that we all need to develop our own set of economic indicators for investing and business purposes.