The Backyard Effect

In the ski business, it’s been said that an inch of snow in New York is worth a foot in the mountains. People often decide whether to go skiing based on how things look out the window, not on the latest snow reports

A similar thing seems to be happening in the economy. The sub-prime debacle has a lot of financial firms reeling. Thousands of professionals have been laid off as a result. And one long-time analyst told me that the employment picture is the worst he’s ever seen it.

But that’s just Wall Street. In the heartland, exports are booming, profits are healthy, and higher food prices mean that many farmers are actually earning a profit. I don’t want to minimize the slowdown, but it’s really not all that bad.

But you wouldn’t guess that from the reports you get from Wall Street economists. The “backyard effect” means that it’s tough for them to paint a positive picture when their buddies are getting laid off.

Understanding the context reminds us to consider who’s writing the latest report.

Douglas R. Tengdin, CFA
Chief Investment Officer
Leave a comment if you have any questions—I read them all!

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