Economic trends have been a hot button lately and I think it’s clear that we have reached a point that predicting economic trends is becoming more enigmatic than usual. I have been writing of late about how investors and the general populous for that matter want the economic downturn to end so badly, that they will hang on every rare piece of good news that the media is willing to print about a recovery. As a fund manager of a private debt fund that is collateralized by everyone’s favorite topic, real estate, I believe I need to keep my finger on the pulse both on the ground and in the financial air that is media, institutions, and investors. Though we concentrate on commercial real estate we still need to try and have an overall understanding of all the markets. Because of this I don’t have the option to choose a market religion that is either bull or bear, so I reserve the right to change my mind and in fact hold conflicting opinions about the same topic. This brings me to a theory I have about economic trends and the forces that affect them that is a bit counter to what I wrote in “When The Crisis End the Bear Market Begins“. I don’t believe my theory is original and I am sure someone out there has considered this, but here it is. Is it possible that negative economic trends will be affected by technology, and specifically the technological advances in communication? Here is the premise for this theory. The highly advanced communication that most of the developed world enjoys allows all of us to digest an incredible amount of information at the same time. If the message is negative it may create fear that will then force us to try and deal with that fear or ignore it. Either way we are striving for some sort of stasis that allows us to get past it mentally, and by doing so it leaves us prepared to take in a more positive message. As human we can adapt very quickly so any additional negative messages will be absorbed and dealt with, or ignored and forgotten at a quicker rate. So the basics are this, if we can all get the negative messages quicker and absorb it and get past it quicker, then it provides us that point of stasis that lays the groundwork for more positive news or a recovery in this case. Perception is reality and we all want the perception that everything is fine. This doesn’t remove the fundamental issues in the economy but it does aide us in providing a better perception, thus increased consumer confidence which is the true driver of the economy.

For all the economists out there, I do apologize for the crudeness of the premise but I think the general idea is there. Communication provides a perception, and that perception is defining our reality. I do still stand on the fact that a recovery is far off, but with the technological factors at work only a fool would predict how far, far off actually is.

Copyright: Dominic Mazzone, Regent Global Funds 2008