Macro Investor this week

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We’ve spoken at length of feedback loops, self-referencing signals and market reflexivity at Macro Investor, but until now we haven’t discussed these in the specific context of the ultimate economic spin-cyle: the US presidential election.
This week, markets will be drawn more than ever to the minutae of Obama and Romney’s daily campaigns, searching for an indication of who will win and what it will mean for asset prices. And while we have thoughts on that of our own – more of this in our special report – what this more importantly demonstrates is how important the links between politics and economics, economics and markets, markets and society have become.
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It’s commonly thought that statistics like unemployment are lagging indicators and figures like index prices are leading indicators. But since the GFC this truism – like so many others – has been cast into the dumpmaster of orthodox financial lore. Nowadays everything is a leading indicator of everything else and instead of search for signals we should be searching for patterns. Like a scholar who studies a text or a scientist who dates a fossil, there are seldom screaming indicators, only subtle trends. And in looking at the history of US politics or the fundamentals that stand behind last week’s economic data, we can get far more insight than any simple reading of polling numbers or CPI.
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About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.