ECONOMIC CATEGORIES: Setting the Stage

 

“There must be a hundred people who know what needs to be done for every
one person who is prepared to do it.”
– Thomas Sowell

 

Howdy, gang!  I trust that all is well with you and yours as we have now successfully broken in a new year along with (more than likely) some new personal resolutions. 2017 is now in the rearview mirror and what looks to be an interesting 2018 is laid out in front of us on the open road!  Here’s to doing what we can to make this year as successful as possible!

For the past few months, this blog has been focusing on some of the more specific aspects of economic analysis.  I understand that this particular aspect of trading is likely something that gets ignored, forgotten, or misunderstood. There are some valid reasons as to why this sometimes happens, too. The biggest reason is likely that the world of economic research/analysis is pretty large and cluttered combined with the fact that there are only a handful of things that act as absolutes. We tend to lean towards complacency when faced with an overabundance of unorganized information, which is probably why I decided to focus on some particular aspects of macroeconomics. 

In the previous installments of Know Good Things, I outlined and explained the descriptive identities of the types of reports we have access to. I’ve found it to be personally helpful to have a theoretical understanding of the ramifications of economic reports (positive or negative) because of the simple fact that we are constantly bombarded with information on a daily basis. The more I understood about the impact of particular reports the better I became at including this type of analysis in my own trading/investing routine. Things eventually felt like they were “slowing down” for me, which absolutely made it easier to find myself in an effective state of mind.

There are three types of reports, which I expounded upon in previous installments of Know Good Things. Those types are:

• Leading

• Lagging &

• Coincident  

Each is worth knowing and each has their own level of innate value. I think it goes without saying that the most valuable and helpful type of economic report is the leading indicator, but (unfortunately) we don’t have access to a whole heck of a lot of them! It also takes an unspecified amount of time for those leading indicators to rear their heads and show up as price action in the markets, but at least we’re prepared… right?

There are also three kinds of directional classifications associated with the types of reports. Those classifications are:

• Procyclic,

• Countercyclic &

• Acyclic. 

Again, each is worth knowing as they present information that could certainly help us become more effective in our analysis, but if we don’t know what we’re looking at (the specific type of report) then these classifications don’t really help us out very much.  Therefore, it becomes important for us to have a solid foundational understanding in order for us to reach our potential. What’s the most important thing necessary for us to build a solid foundational understanding? Well, I’ve mentioned it a few times in my previous writings and I’ll continue to say it along the way: time and practice. It takes time, my friends. It takes practice. The more we do it the more we eventually understand! It really only takes ten to fifteen minutes (daily) to start making an impact, but it’s something that you need to choose to do.

In the last blog entry of Know Good Things (which you can find here), I mentioned that I would try to put together a comprehensive listing of the various economic reports along with their respective type and classification. While I’m still in the process of accomplishing that feat, I have put together enough information to at least get things started. Hopefully, you’ll see this information as an opportunity to become a bit more organized in your efforts of becoming more economically literate as well as more likely to begin implementing macroeconomic analysis into your daily/weekly trading routine.

Now, it should be mentioned that I don’t have a specific timeline or agenda regarding how I end up presenting this information because I’m still in the process of putting everything together, but I will try my best to explain things (as I have grown to understand them) along the way. Allow me to simply begin by listing specific categories for each individual economic report. That way, we’ll be able to keep things in as much order as possible.

All individual economic reports will fall into one of seven different categories.  It’s unlikely that I will be able to mention every single report because of the sheer volume, but it is likely that you’ll be able to categorize reports on your own once you get a good grip on things. The seven categories are as follows:

1. Output, Income, and Spending

2. (Un)Employment and Wages

3. Production and Business Activity

4. Prices

5. Money and Markets

6. Federal Finance

7. International Statistics

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In future installments of Know Good Things, I will take each category and break them down with the names of various economic reports along with their respective type (leading, lagging, or coincident) and classification (procyclic, countercyclic, or acyclic). It is my hope that by doing this you will be able to expedite your learning curve and increase your initial level of understanding regarding macroeconomics. Once we’ve completed this task and have tackled all seven categories, I think it may be helpful (and interesting) to look at things in real-time and discuss the week that lays before us by looking at the reports that are scheduled.  If there are any suggestions for specific topics that you’d like for me to write about then please let me know by leaving a comment at the bottom of this particular web page. I definitely want to make sure that I’m writing about things that are helpful and interesting for you, the reader! Don’t be afraid to steer me in a specific direction from time to time.

I’ve got some work to do in order to deliver what I just laid out for you all! In the meantime, keep doing what you can do on your own by practicing. Utilize the many various tools available on Tackle Trading’s website to assist you along the way and keep in mind that becoming a successful trader requires time and discipline… both of which are things that only you can give to yourself.  Good luck, my friends!  God bless!

 

Be good.  Do good.  Know good.

Kleiny (@KnowGoodThings)

Columbus, Indiana