Ed Lotterman Got It Right, as Usual...

In his August 2nd, 2010 column, "Don't underestimate economic complexity" Ed Lotterman points out that the economy is much too complex to attribute performance to a few simple factors, even such heavy-weights as taxation and deregulation. There are just too many factors to account for; in fact, ultimately, the performance of the economy is the sum of every decision each of us makes from moment to moment that has an impact on the flow of money. My decision to not spend an extra 30 minutes at a downtown coffee shop saved me $2.50 in parking and cost the parking facility $2.50 in revenue. I then spent it (and much more) filling my gas tank at Costco rather than Albertsons since it is 20 cents cheaper even though it is much further away but that distance was off-set by being close enough to make the $3.20 saving worthwhile. That series of economic decisions was actually much more complicated (and I think rational) but the time it would take for you to read it would be wasted...

The performance of our economy is much more dynamic and unpredictable than we'd like; in fact, economics is much more akin to the science of fluid dynamics and the Heisenberg Principle (think weather prediction) than integral calculus. And when you think in terms of weather prediction, try to imagine that each molecule that makes up the atmosphere has 'free will' and can make seemingly irrational (and hence unpredictable) decisions. That is why the science of economics (literally 'house law') is a backward looking view of the world thru a misshapen lens.

So what? Your economic well-being is best served by shrewd simplicity and patience. And these are best provided by HECS investing in real estate where the Sharpe Ratio and the Sortino Ratio give you the optimal fighting chance of achieving your long-term economic goals.