What is in a statistic?

There is that old adage about lies and statistics, and it seems to be bearing out again. A statistic can be used to measure anything, but what you are actually measuring and what that really tells you may not be the same things. There have been two consumer confidence reports released recently, one positive the other negative, so who to believe?

 

 

• The FNB/BER index is up 3 points
• The MasterCard index is down 11.4 points
• You the consumer...how do you feel?

The thing with consumer confidence indices is that they have a major effect on the psychology of the markets and Socionomics tells us that the invisible hand is often the prevailing mood or sentiment in the market and this mood will frequently be influenced by vested interests. There will always be bulls and bears, optimists and pessimists and depending on who is dominant at any one time will determine the direction of the market, rather than the underlying fundamentals. Economics works cetereris paribus but nothing stays the same and in the flux the invisible hand may direct the market rather than any notion of equilibrium.

Sentiment can create self reinforcing feedback loops that make the market perform as the mood dictates it to, rather than on actual value. So in an uncertain environment the best thing that you can do is be aware of tangible things like how much money you actually have in your savings account, and make certain that you use a budget planner. Then the market will continue to go up and down on a whim but you can choose to stay where you want to be.