A Chicago Tribune article on Sunday named the most useful and useless economic indicators. A panel of 15 economists/analysts (including yours truly) participated in the discussion.
There were many indicators deemed helpful, with very little overlap. As the old expression goes, "that’s what makes a horse race." The big surprise was the widespread agreement, by a large margin, of which indicator was of the least value.
The envelope please . . . (I’m so excited) . . . And the winner of the economic report deemed most worthless is:
No upsets here, the favorite took the prize! Kudos to the conf bd for producing the LEIs — now widely acknowledged as the most useless economic indicator in the land!
Via the Chicago Tribune, here’s our Ubiq-cerpt:™
"We asked 15 economic analysts to tell us which indicators are most–and
least–valuable to everyday investors. One thing they do agree on: Data
are dandy, but trends are tops…
Our experts also named a few names on a handful of economic reports that are worth overlooking.
Leading the list of pans was the leading economic indicators, a monthly index published by The Conference Board that compiles 10 other economic reports, including jobless claims, interest-rate spreads, stock prices and building permits. (emphasis added)
Let me be the first to offer my hearty congratulations to the Conference Board for all their efforts. Thanks to your insightful work, you managed to take something with actual utility for investors, and turn it into a worthless, widely-ridiculed, piece of economic flotsam. Nicely done.
Experts gauge the gauges
Janet Kidd Stewart
Chicago Tribune, September 25, 2005 (Your Money columnist)
Follow Indicators? Look For Momentum
Nelson Munz: Economic Analysis & Commentary
Among individual investors, David Swensen isn’t a household name. But he is an icon in the world of big institutional money managers such as endowments and pension funds.
Mr. Swensen’s fame comes from his oversight of Yale University’s $15 billion endowment fund, which, since he was hired 20 years ago, has returned an average of 16% a year, far outpacing the market and other funds run for universities. Before arriving, Mr. Swensen had never overseen an institutional portfolio, and he brought to the job an unconventional approach for dividing up the portfolio among different asset classes. He is now Yale’s chief investment officer.
Five years ago, Mr. Swensen set out to write a book that would bring the lessons he learned to individual investors. Instead, he says he found that the option most accessible to individuals — mutual funds — often makes it impossible to beat the market. And even when they do find good managers, individuals end up shooting themselves in the foot, he says.
So while Yale relies on actively managed portfolios, Mr. Swensen says individuals should just stick to index funds, especially those run by not-for-profit companies. He also likes exchange-traded funds, which trade on exchanges like stocks, but says "buyer beware."
Excerpts from an interview with Mr. Swensen follow:
WSJ: You had hoped to give small investors a road map for beating the market based on Yale’s approach to investing. What happened?
Mr. Swensen: I found when I started down that path that individuals just don’t have the same set of investment opportunities available to them that we do here at Yale. In fact, the evidence showed me that the mutual-fund industry has completely failed to provide reasonable active-management returns to individuals.
WSJ: To say that it completely failed — that’s a pretty harsh statement to make.
Mr. Swensen: I think the evidence is there. The crux of the failure is with the for-profit management of funds for individuals. Mutual-fund managers have a fiduciary responsibility to investors. Obviously, if they are operating in a for-profit mode, they have a profit motive. When you put the profit motive up against fiduciary responsibility, that fiduciary responsibility loses and profits win.
continued below . . .
Yale Manager Blasts Industry
THE WALL STREET JOURNAL, September 6, 2005