A weather eye on the world


Those undertaking to manage their own personal due diligence on an ongoing basis need to look beyond the headlines to understand where the world is headed.

Since, of course, where the world is headed shows up eventually with your employer, and with the prospects of its competitors — even the whole sector you work in.

Take 2012 as an example.

Much has been made in the past few weeks how the stubborn levels of unemployment in the United States are beginning to fall.

But dig into other sources, and you might paint a different picture.

“Unemployment” is counted by those making claims for it. For those who are not entitled to make a claim, or those whose benefits are exhausted, they’re off the count. Unfortunately, the statistics are drawn up in such a way that it’s presumed they’re employed.

So you look at the births/deaths model from the Bureau for Labor Statistics; you look at the payroll numbers; you look at the length of time it takes newly minted degree holders to find work (and did they find it in the field they studied?) and you try to answer for yourself a very basic question:

If unemployment (a proxy for a growing/shrinking economy) is falling, do I see more jobs filled than there are new people entering the workforce? That’s the only way people who are “on the shelf” but would like to work will be absorbed, whether they’re on the “official shelf” of “unemployment” or the unofficial one of “off the books”.

Shipping is another good set of indicators to follow.

Earlier this year the Baltic Dry Index (a major world shipping index) started to tumble, and it remains resolutely headed down. This means fewer commodities and goods are moving by ship world wide.

If you had seen that, you might keep a weather eye on the major trading relationships. Australian resources to China. Chinese goods to Europe and America. (There are others, but you really ought to ferret out the ones that would give you good signals for the work you do.)

What you’d have seen was a falling export rate in Australia (and worries about it there), and you might have anticipated a Chinese slowdown. Bingo! — this fall China’s GDP growth is at stall speed, and the country flipped into a trade deficit last month.

Think about that. If the “workshop of the world” — and that’s what China became with offshoring — is running a trade deficit (where it imported more than it exported), then what’s happened to demand for all those goods?

If you smell the American, Canadian, Australian, European, etc. economies about to take another hit, you’d be on the right track. Our merchants don’t think we will buy it if they ship it here and stock it, so it never leaves China…

In a world filled with headlines in the business section about how many of the latest gadget got sold, or how many billions a company reported, it’s easy to miss the subtle signals.

In fact, since the economy (and your employer’s place in it) is a complex adaptive system, detecting weak signals earlier is a key route to thriving in difficult times, and prospering when others don’t.

The author Robert Heinlein once had one of his characters in a novel point out to another that all the real news was in articles one column wide by half an inch tall somewhere around page forty-six. His point was to seek out relevant weak signals ahead of the crowd.

Or you can be surprised by them. Your option.

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