Some trends are obvious enough and visible to all investors. Others are more subtle, but are just as potent, and these often slip "under the radar."
Case in point: The U.S. Treasury's $109 billion downward revision of its borrowing underscores why investors need to keep budget and economic projections in perspective. Investors should not view projections, particularly those 5, 7 and 10 years out and longer, as ironclad.
That's because a change in only one variable, GDP for example, can send a 5-year projection rocketing well above (or below) the earlier forecast.
In the U.S. Treasury's case, it now expects to borrow only $406 billion, not $515 billion, in the federal government's Q4 (July to September). The main reason for the improved borrowing picture? Spending on banking and housing intervention efforts has been lower than expected.
Again, that's a roughly $110 billion federal budget improvement in a few months -- an enormous amount of money -- and it provides the latest example that demonstrates why out-year projections are rough estimates that can vary tremendously -- not truths that are etched in stone.
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