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Trust Your Gut (Posted October 31, 2016)

In practically every aspect of our lives these days, we rely on data.  Either it’s data we seem to use up too frequently on our phone plans during the month or it’s data concerning something that’s coming up in our lives on which we need to make a decision – and in both cases, if we use the data incorrectly, it could certainly cost us (or so we think). 

When Nordstrom decided to stop releasing monthly sales numbers by store, Credit Suisse – a company that provides, among other things, data to the financial industry – claimed they could reliably predict Nordstrom’s monthly numbers by using monthly sales figures from (I’m not making this up) The Cheesecake Factory.  Credit Suisse believes the customer demographics of both companies are fairly similar so their spending behaviors will also be similar (i.e. if sales go up at CF, they go up at Nordstrom).  Credit Suisse claims they’ve gone back and compared available data from the past, and their claim bears fruit (not to be confused with the strawberries, blueberries, or cherries you find most frequently atop a cheesecake). 

FEMA claims they can predict where a hurricane has wreaked the most havoc by seeing where Waffle House restaurants remained open and which ones closed.  In 2011’s Hurricane Irene, they witnessed WH outlets closing in a number of states on the eastern seaboard, and only one in Virginia closing, so they deployed more supplies/people to those areas where WH was closed and fewer in Virginia.  They employed this theory most recently with Hurricane Matthew and relied on WH’s Twitter account to give them updates.  (I’m not that sure about how secure a Twitter account is, but it seems HIGHLY possible a 15-year-old could hack it and cause FEMA to dispatch a fleet of semis to a bar mitzvah in Toledo, Ohio, if they’re not careful.) 

In a recent newspaper article, the author said he could predict the future of the housing market (it wasn’t rosy) by looking at IKEA’s recently released 2017 catalog.  He noted that rather than having walls in a house, IKEA is telling you that you’ll separate rooms using clothes racks instead.  Along those same lines, rather than sleeping in a bed in an actual bedroom, you’ll live in a “multi-functional” space with a sofa bed as your day-to-day sleeping arrangement.  To wit, he was predicting that housing prices will continue to soar to heights where people will be able to afford only the square footage of the box in which the IKEA products were delivered.  (The ONLY upside to all of that would be that EVERYTHING could be assembled and fixed with just that one Allen wrench that comes with every IKEA product ever made.) 

Admittedly, I’m poking a bit of fun at Credit Suisse, FEMA, and IKEA, but I’m not saying they’re necessarily wrong . . . OR right for that matter.  I’m just giving you three examples of the lengths many people will go to in order to gather data and “predict” the future.  Many people have spent the last six to twelve months in a sort of analysis paralysis about the real estate and mortgage markets because of this side-show election we have going on here in the US.  They’re poring over web sites and cable news programs all in the interest of trying to decide if they should buy their first home, sell their home and downsize, or purchase an investment property – and yet they still haven’t done anything on that front.  Why?  Well, the answer is quite simple: they want someone else to make their decision for them so they can blame them if it’s the wrong decision.  I’m going to tell you something that flies in the face of all that: TRUST YOUR GUT and move forward.  Sure, you might make a decision that will leave you holding a few extra proverbial IKEA screws that you know should have been used but can’t figure out where they go.  You might find yourself needing to eat at a Waffle House instead of a Cheesecake Factory for a while.  Using the hurricane as an analogy: as unpredictable as its path may be, it’s a lot harder for it to hit a moving target – so move!

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