Economic Reports Drive Short-Term Market Behavior, but They Hardly Present the Truth

May 6th, 2007

6 May, 2006 - As again, top financial stories in the U.S. are led by investors waiting for economic reports to gauge whether the markets will go higher or will head for a steep downturn, such chatter is really very foolish. Though it is undeniable that such reports influence markets everywhere in the world, the reality is that investors should not base their investment decisions upon them. Why?

While investors will decide what to do based upon a mountain of statistics set to be released including the Consumer Price Index, the Consumer Confidence Index, the retail sales report, the consumer credit report, and the mother of them all, the Federal Open Market Committee’s decision about interest rates, the fact is that since all these reports are deceptive to some degree, short-term movements in the market will be shaped by public perception, but the reality that undercuts these reports will shape the market’s long term actions. Any statistician worth his or her weight in salt knows that you can manipulate any report to “prove” to the world whatever you desire despite the real numbers. I’ve written numerous articles about this on my blog, so I will not waste any time explaining why again here (just perform a search here on this blog if you want to know why these government reports are so deceptive).

For example, if I had followed Warren Buffet’s sentiments about a particular investment opportunity a year ago, I would not be sitting on some of the largest gains in my portfolio now (numerous stocks that have all appreciated by over 80% in less than a year). The fact is, even famously successful investors have been famously wrong in the past. And the fact is, rarely do any of their hugely successful investments garner any attention until AFTER they’ve already made a huge profit from it (meaning that years back when they made their initial investment, they did so under the radar screen). So this is precisely why as an investor, until you learn to do-it-yourself, you will never have the success you dream about.

Technorati Tags: Warren Buffet, consumer confidence index, politics and stocks, investment myths

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J.S. Kim is the founder and Managing Director of SmartKnowledgeU™, a comprehensive online investment course that uses novel, proprietary advanced wealth planning techniques and the long tail of investing to identify low-risk, high-reward investment opportunities that seek to yield 25% or greater annual returns.

Entry Filed under: The Biggest Investment Myths