One of the fundamental principles of economics is “rationality”—the notion that all actors in a market have similar information, preferences, and abilities to project the future.

Like all economists, I know this isn’t really true, yet it still influences how I view the world. So the extent to which Daniel Kahneman proves this idea false—not just at the aggregate level, but at the individual level—comes as something of a shock.

The news is in: Black Friday was a bust. Sales over the Thanksgiving weekend were down 11 percent, with 6 million fewer shoppers this year than last.Sounds like a pretty bleak Christmas, no?

In fact, Black Friday—so named because it’s when retailers get as much as 40 percent of their annual sales, moving from the red into the black—may not be the best bellwether of the holiday shopping season. While lackluster sales aren’t necessarily a good sign, they also don’t spell doom for holiday spending.

In my latest Market Thoughts video, I provide an update on U.S. economic growth and explain how a sluggish Japan and Europe factor into the recovery. You'll also hear my thoughts on holiday consumer spending.

Once again, it’s time for our monthly update on risk factors that have proven to be good indicators of economic trouble ahead. As expected, the data hasn’t changed much from last month—it remains positive in almost all areas and has continued to improve in many cases—but it’s still important to keep an eye on things.

As we enter the month of December, the economic forecast remains encouraging.

We talked the other day about the power of compounding and how it can be used to help determine whether trends are sustainable. The idea is that the compounded returns will at some point run into a limit that can’t be surpassed.

It sounds simple, but the idea of limits actually isn’t so clear. In many cases, the real issue isn’t a physical limit, but an economic and technological one.

We interrupt this broadcast to bring you important news: the U.S. economy is still growing—and faster than many expected.

I hesitate to highlight this, as I fear I'm starting to come off as a perennial optimist, even a cheerleader, for the economy. But it’s important to consult the data, good and bad alike, and there have been plenty of positive developments lately. 

I wrote last week about trends that can’t continue and noted that I would be looking at more of them through December. First, though, it makes sense to consider exactly what it is that makes a trend unsustainable.

Why can’t something go on forever?

As the industry that led us to disaster in 2008, housing has had a long road back. You can make a good argument that, until the housing market returns to normal, the economy hasn’t really recovered. While not a defining indicator, a healthy housing market is a necessary condition for recovery.

I last looked at housing in June, so it’s time for an update. The news is actually quite good, despite some of the headlines recently. 

I have two reasons for writing a post on gratitude today: The first is that I have much to be grateful for (I plan to write a longer post about this next week as we approach Thanksgiving), and the second is that I have been in meetings all day and am too short on time to finish the housing market post I had planned. You’ll get that tomorrow.

“If something can’t go on forever, it will stop.” — Herb Stein

When you think about it, we really do live in an age of miracles. Less than 24 hours ago, I was in London, but I slept in my own bed last night and am back at work in Boston today. While in Europe, I kept in touch with my family via video-call and simply pulled out my credit card to pay for things. It was all astonishingly seamless.