Learn how to do External Analysis of a company (with examples)

Economic analysis is a complex process and you may end up wasting your day-night figuring out the roots. Better leave it to the experts!

But, what if even the so called experts fail to know what is coming up? Who will you look up to?

Ben Bernanke was the head of the Federal Reserve during the economic crisis 2007-08. He headed reserve bank from 2006 to 2014. Before the crisis, he predicted that the United States economy is moving smooth and not into the recession. But, he was wrong. Economy fell, and it fell hard!

So what should you do?

My suggestion is that you look up to your common sense. Use your sense to assess all the economic indicators and make an educated guess. You can do it. You only need to know which indicators are important and which ones to ignore.

But before you know which economic indicators to ignore, you have to know all of them properly. You can only take the shortcut if you know where the long route is going.

A question is, should you ignore the economic experts at all?

No. Listen to them. But source your information from multiple experts instead of depending on the select few. You will always find few experts opposing an idea and few others supporting the same.

Listen to everyone, and then conclude on your analysis. This can be your best approach to assess the economic condition of a country.

In the introduction chapter and in the political analysis section, we learned how to form questions based on your business needs and the factor you are analyzing. You can take similar approach to conduct this analysis.