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A Spaghetti Economy

Dian Vujovich

IT’S SUMMERTIME in South Florida, where I live. The temperatures are high, the humidity too, and the sandy beaches too hot to walk barefoot on. Then there’s the Atlantic hurricane season. It’s in full swing and runs from June 1 to Nov. 30.

What’s any of that got to do with managing money? Think spaghetti map predictions.

We’ve all seen those spaghetti maps on television and online. They typically appear 10 to 14 days before there’s a possibility of a hurricane or cyclone coming our way. The strands show possible courses a storm may take as it tracks across the sea toward land.

Each line on the map represents a model that comes from a different weather source, such as the hurricane weather research forecast from the National Hurricane Center or the global forecast system from the National Centers for Environmental Information.

There are dozens of companies around the world that offer weather modeling services. That’s why there are so many different strands on a weather map, not just one or two spaghetti lines.

In the same way, we’ve all heard way too many predictions about the economy lately from a host of different economic and money-related sources. All claim to offer insight and direction about the current state and possible direction of the U.S. economy. But like the weather model makers, all see and calculate things differently.

And therein lies the rub: Nobody knows for sure which model, projection, prediction or forecast will be spot on.

On July 1, 2021, SNN News in Sarasota, Florida, offered this commentary on hurricane spaghetti models: “The problem arises when people use spaghetti models to plan for a possible landfall. Spaghetti plots are not official forecasts. Official forecasts take all the models into account. They don’t simply take all the models and put the official track in the middle of it. Some models are updated more often, and some models are more reliable….”

And so it is with today’s predictions for the economy. Where it’s really headed in the near-term to mid-term to long-term is anybody’s guess. That’s because there are so many local, regional, national and world variables that affect the modeling.

What we actually do know today is that interest rates are rising, money is tougher to get your hands on, and it’s costing every one of us more money to live today than it did yesterday.

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We can try to describe this with a swirl of economic terms like gross domestic product or inflation in its various forms—stagflation, recession, depression, hyperinflation and disinflation. We can plumb the depths of the bear market and then project how declining stock prices might affect businesses, people and their retirement accounts.

In the end, it’s all talk and speculation. No prediction comes with certainty or guarantee. The best any of us can do in these uncertain times is to stay focused on our own life and financial picture, and not compare ours with anyone else’s.

I was talking with two friends the other day, both in their mid-50s and currently employed. Each was wondering if they’ll have to work a few more years because their retirement accounts have lost so much value. Their adult kids, feeling the effects of a rising interest rate environment, have had to put off purchasing their first homes.

It’s a hold-on and hang-in-there financial world for now.

On the other hand, a one-percenter I know isn’t concerned. He’s adding money to the stock market and considering purchasing some real estate in the near future if home prices drop and more foreclosures surface.

Then there’s a senior-aged friend who has no idea where she’ll live next month. The landlord increased her monthly rent by $400 and she can’t afford that. As so many retirees understand, there’s no wiggle room for those living on a fixed income. Her financial future likely will depend on the thoughtfulness and graceful giving of others.

As we all eventually come to know, no two financial lives are the same. Nor have they ever been. Each represents a spaghetti line on a map that’s uniquely their own. If you ask me what the economy looks like, I’ve got to say it looks like a spaghetti economy to me.

Back in the day, Dian Vujovich was a nationally syndicated mutual fund columnist, wrote a handful of books about investing and retirement, and was a luxury travel writer who won a few awards for her work. Today, she’s grateful to still be able to string a few sentences together and create a story where there once was none. Dian lives in sunny Florida and is quick to tell anyone who cares to listen that living a long life has now become obscenely expensive. Her previous article was Sell in May.

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Margaret Fallon
Margaret Fallon
4 months ago

enjoyed your article Dian, very refreshing analogy, totally unexpected coming out of left field, the million dollar question these days is “are we going into a recession? are stock prices going to go lower or is it going to be a “soft landing”? hard to say. Please keep publishing.

Rick Connor
Rick Connor
4 months ago

Dian – thanks the interesting story. I enjoyed the analogy. I sent much of my career building predictive models in aerospace engineering. These modest were built on well understood laws of physics, but still challenging. I have great respect for how massively complex weather models are compared to what I worked on. Trying to predict the future behavior of economies and markets is beyond my capabilities.

1PF
1PF
4 months ago

An unexpected analogy -> an enjoyable read. I hope you’ll continue creating stories.

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