Looking for the Right Economic Indicators: Is It Time to Bunt or Steal?

By Marcelo Bermúdez, President, Figueroa Capital Group, a subsidiary of the Charles Dunn Co.

There are several signs in the economy telling us what to do, and we’re all looking for the right indicator to make great decisions in the ballgame.

By Marcelo Bermúdez,
President, Figueroa Capital Group, a subsidiary of the Charles Dunn Co.

Over the baseball weekend, my son received his second game ball for excellent hitting. His coach’s ability to run practices efficiently three times a week where everyone fields, hits, and practices situational plays to learn from their mistakes from the last game is what is making him a better player. Soon, they’ll start teaching the secret signs for base running. Remember the signs? The first base coach would sweep the bill of his hat, touch his nose, tap his elbow, tug on his ear and finally use his index finger to point to the wrist. The key was to wait for the indicator sign and the next one would be the instruction to bunt, steal, or use some other tactic to gain advantage. There are several signs in the economy telling us what to do and we’re all looking for the right indicator to make great decisions.

Sweeping the hat: With the elections looming in the next few months, there are concerns about fiscal policy needing some face time since Bush-era tax stimuli and government spending programs will expire (or increase depending on your politics) in 2013. I’ve read and attended several economic forecasts and the expected hit to the GDP will be somewhere in the 1.5 – 3.5 percent range. This could deal a death blow to an already-fragile economy on the mend.

Touching the nose: Asia’s projected GDP growth — including China, East and South Asia and the major ASEAN economies — continue to grow at a healthy clip, although some revise China’s growth to moderate. China’s account surplus has decreased from its 2007 peak of 10 percent to a recent 3 percent. This reflects a challenge to continue to gain market share and that they are becoming more dependent on consumption. This would affect exports by Asian countries that depend on China to drive manufacturing.

Tapping the elbow: The European Union has myriad happenings including elections in France, possibly Greece, Germany wanting a $700 billion IMF anti-crisis firewall, Spanish union strikes and a new budget proposal with $36 billion in cuts, and referendums in Ireland that may close the door on future bailouts as $3.1 billion in promissory notes come due this Saturday. Many of the other member countries have similar issues and need viable answers.

Tugging the ear: The Middle East tensions continue to rise and we are seeing it put pressure on oil prices. If this can’t be controlled, all bets are off on whatever indicator you’re using, no matter how green you think the economy can become.

Pointing to the wrist: Lastly, local market data seems to be generally upbeat. Figueroa Capital is on its way to closing its fifth transaction this year and has been interviewing potential new staff. Lending parameters have eased somewhat and investment theses across all levels seem to be taking solid form. The ones in full effect are showing positive results. There is also an increased velocity of announcements from lenders to brokers indicating deals are getting done regardless of all of the headwinds.

The key is to continue to play the game and watch for the wrist to dominate the headlines. The other economic data is certainly important but can cloud your vision. You can’t let it have dominion. Earlier this evening, my son had another game. Their team didn’t lose; they got spanked 21-5 by a team that they beat two weeks ago by eight runs. A lot of signs were missed tonight, but they’ll be back on the field this Saturday to play again. The economy will do the same and so should you.