The Anna Maria Island Sun Newspaper

Vol. 14 No. 14 - January 29, 2014


Anna Maria Island Sun News Story

Perception vs. reality

Investment Corner

The human psyche is an interesting thing to study, especially in the area of perceptions of the past and future. The differences in how we feel about our prospects are often vastly different than the reality of the situation as measured by hard facts. Of course, each of us is different, so the observations expressed here are meant to describe the general, or majority, opinions of the population, not each individual’s view.

In meeting with clients and in having general conversations with others in the course of various meetings or social events, there is still a preponderance of those who feel the U.S. economy is doing poorly, and many think we are still in a recession. The facts just don’t bear this out.

The recession caused by the residential real estate bubble bursting and the associated mortgage troubles back in 2007 and 2008, ended in the summer of 2009. That’s four and a half years ago! We have seen positive economic growth in every quarter since that time, and that rate of growth seems to be accelerating a bit recently.

Granted, we still have an unemployment rate of about 7 percent, down from about 9 percent at the depths of the last recession. Keep in mind that it is rare for the unemployment rate to go much below the 4 – 5 percent range because there is always a certain amount of natural unemployment, which describes people in between jobs either by their choice or by the normal pace of companies making changes to their business plans.

So, while we have some work to do to get back to full employment, we’re not that far away. By other measures the economy is doing great. The level of gross domestic product, which is the total output of all goods and services by the U.S., is now at a higher level than before the Great Recession, and continues to grow. Famously, the U.S. stock market spent most of 2013 making new all-time highs, a pattern that has continued into 2014.

I’d like to share the quotes below from the Conference Board’s website. The Conference Board is a non-profit group of economist who measure economic activity. I’ve mentioned their Leading Economic Index before. The Index has an enviable track record of identifying future economic trends, and recessions don’t usually occur without a downturn in the index. For the last several years, the index has pointed to improvement, not a new recession.

“The LEI continues on a broad-based upward trend, suggesting gradually strengthening economic conditions through early 2014,” said Ataman Ozyildirim, economist at The Conference Board. “Improving labor markets and new orders in manufacturing, combined with strong financial indicators, drove November’s gain. However, consumers’ outlook for the economy and the drop in housing permits continue to pose risks in 2014.”

“November data reflect a U.S. economy that is expanding modestly, discounting some renewal in activity after the government shutdown,” said Ken Goldstein, economist at The Conference Board. “The coincident economic index shows the economy expanding at a relatively slow pace. The trend in the leading economic index is stronger, signaling for some time that the economy is developing forward momentum, and will continue to strengthen through early 2014.” (Source:

The part I find interesting in the quote above is where they identify “consumer’s outlooks” as a risk to continued economic growth. To a certain extent, our perceptions are self-fulfilling. If, as a group, we all feel terrible about our future and reduce our level of economic activity, then we may cause what we fear the most.

There is no doubt we have a recession in our future. But at the present time I would hesitate to say its right around the corner. Let’s enjoy the recovering economy we have at the moment and worry about a recession when there is something to worry about.

Tom Breiter is president of Breiter Capital Management, Inc., an Anna Maria based investment advisor. He can be reached at 778-1900. Some of the investment concepts highlighted in this column may carry the risk of loss of principal, and investors should determine appropriateness for their personal situation before investing. Visit

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