(February 23) — People who are interested in the stock and bond markets should spend at least several hours a week reading economists and digesting their interpretations of economic data, says Don Coxe in today’s National Post.
“This is not a consensus view,” Coxe admits. “Peter Lynch, Fidelity’s most famed portfolio manager, says if you spend more than 14 minutes a year reading economists you are wasting your time. Speakers at investment conferences routinely begin their speeches with economist jokes. Many institutional investing firms will not invite economists into their offices to give presentations, but routinely welcome strategists.”
But, says Coxe, there are important differences between strategists, like him, and economists: “Economists have intense university training in their discipline, usually with Ph.D.s. Strategists come from a variety of educational backgrounds; their knowledge comes from on-the-job training as portfolio managers, frequently as chief investment officers. They are coaches who have played — and may still be playing — the game.
“The two types of market commentators have different roles. Economists … are charged with forecasting the economy, whereas strategists forecast the capital markets.
It is economists who tell us about housing starts, GDP, inflation, the employment cost index, retail sales and other vital signs of the economy. Each day some new statistics are released that economists must interpret for the rest of us. Economists are, quite frankly, indispensable for anyone trying to understand the fast-breaking news that drives the global economy. As smart as Lynch unquestionably is, he is wrong about economists.”