Listen to Our PodcastThere’s an ancient Babylonian text that reads: “If the sheep’s liver has two lines to the left of the gall bladder, the prince’s men will abandon him.”1
It’s an instruction for the practitioner of divination, telling him what to look for as he examines the internal organs of a sacrificial animal. And it’s one of thousands of omens the ancient Mesopotamians cataloged to enable themselves to foretell a wide range of events, from the results of a battle to whether or not a sick person would get well.
They looked for these prophetical signs in everything from animal entrails to astronomical phenomena, carefully noting the results on clay tablets.
It’s easy to feel superior in all our modern scientific knowledge. Until we find ourselves doing something similar—searching for signs that can predict the financial future with certainty.
They’re called non-market or leading indicators and ever since our latest economic expansion has outlived the one before, people have been looking for anything that might signal the timing of the next recession.
Basically, anything that might have occurred around 2007 (right before the financial crisis), seems to be fair game. For example, ticket prices on Broadway shows softened before the big crash.2 Men’s neckties became wider and less colorful. And underwear sales were down.3 If you look hard enough, you can find evidence for all three today.
You could argue that while a sheep’s liver has nothing to do with who will win a battle, something like demand for Broadway tickets is an indicator which signals that people are already starting to feel the economic contraction. Or maybe there just aren’t that many good shows this year. Or tickets were too expensive to start with. Or pick any of a hundred factors that affect ticket prices.
The ancient Babylonians were not illogical. They invented the base sixty mathematical systems we still use today for navigation and timekeeping. They had a pretty close approximation of Pi. And they were most likely generating Pythagorean triples 1,500 years before Pythagoras.4
Since they lived in a world where princes were often betrayed by their underlings, this type of event most likely followed a diviner seeing liver lines next to a gall bladder.
The same rule is in effect for us. Since contractions are just as much a part of our modern economy as expansions, you can be sure harbingers of their arrival that people can point to later.
In fact, our next recession is, at some point, such a sure thing that as a prudent investor you should be preparing for it today.
Trim your needless expenses. Pay down debt. And maintain discipline as you invest in a prudently diverse portfolio. Our personalized wealth management services are designed to provide investors with guidance, education, and most importantly, effective strategies that help accomplish your financial goals.
At the Quraishi Law Firm, our mission is to inspire others to make informed and educated decisions about their money, so they can live their life by design, not by default. By integrating your legal, tax and financial plan into one comprehensive plan and looking at the “big picture,” we can make sure that all of the pieces of your plan fit together seamlessly to accomplish your goals and dreams.
You’ll be better prepared for whatever the market does next. And you won’t need to worry about what the latest men’s tie styles are portending.
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Sources:
1. http://go.efficientadvisors.com/e/91522/s-uploads-shared-docs-ois6-pdf/63lst8/742226465?h=B7vECJz1esB8uBn22D1BYgW_-Y3V61PshJjmM9uz1Y0
2. http://go.efficientadvisors.com/e/91522/ay-ticket-prices-comments-area/63lstb/742226465?h=B7vECJz1esB8uBn22D1BYgW_-Y3V61PshJjmM9uz1Y0
3. http://go.efficientadvisors.com/e/91522/onomic-indicators-of-recession/63lstd/742226465?h=B7vECJz1esB8uBn22D1BYgW_-Y3V61PshJjmM9uz1Y0
Disclosure:
The views expressed herein are exclusively those of Efficient Advisors, LLC (‘EA’), and are not meant as investment advice and are subject to change. All charts and graphs are presented for informational and analytical purposes only. No chart or graph is intended to be used as a guide to investing. EA portfolios may contain specific securities that have been mentioned herein. EA makes no claim as to the suitability of these securities. Past performance is not a guarantee of future performance. Information contained herein is derived from sources we believe to be reliable, however, we do not represent that this information is complete or accurate and it should not be relied upon as such. All opinions expressed herein are subject to change without notice. This information is prepared for general information only. It does not have regard to the specific investment objectives, financial situation and the particular needs of any specific person who may receive this report. You should seek financial advice regarding the appropriateness of investing in any security or investment strategy discussed or recommended in this report and should understand that statements regarding future prospects may not be realized. You should note that security values may fluctuate and that each security’s price or value may rise or fall. Accordingly, investors may receive back less than originally invested. Investing in any security involves certain systematic risks including, but not limited to, market risk, interest-rate risk, inflation risk, and event risk. These risks are in addition to any unsystematic risks associated with particular investment styles or strategies.
