All but one of 30 stocks in the Dow Jones Industrial Average gained as the government said initial claims for unemployment benefits fell to 512,000 last week and productivity surged at the fastest pace in six years.
So now, Art Hogan, a journeyman commentator is seeing all well. A month ago, he was in the down is the new up camp. In other words, whatever is happening is what he bets on. Fine! A nice guy that’s how most people are. That’s human beings.
So now, everybody knows the economy is better. Claims for unemployment dropped a lot.
Productivity surged the most since 2003. That’s great for profits of companies, and you know all the ideas about you have to improve employment. When you have more business, the factory runs more, and you don’t have more employees, that is when productivity goes up. We invest in employers. Employers and employees are not always aligned. They don’t always have the same interest.
In fact, it’s even more interesting than that, because the existing employees, the people who already are working they make more money, when they get more business, but their interests are not aligned with the new people who want to get hired. Neither, the company or the existing employees want to pay new people until they absolutely have to.
You were wondering about improvement without improving jobs. Now you are seeing it. Remember this it in the next downturn. But now I’m way less aggressive than I was last spring.
Now the economy is getting better, but now everybody knows it. So now we’re back to the pendulum. I used to talk about the pendulum all the time, because that’s how – in the absence of real change, that’s how people’s moods go. Like a pendulum they swing back and forth from positive to negative.
So why do you think we haven’t been talking about the pendulum? This will really help you make money. We haven’t been talking about the pendulum swinging back and forth, because there was real change going on, a real turning point and a real adjustment in price. First the world was much riskier, so the world adjusted the prices of stocks down, and the prices of bonds up.
It was riskier. If it’s riskier, risky assets are worth less safe assets are more desirable and worth more. Simple isn’t it?
So then when there was no depression, and we could see the economy was going to improve, via the leading indicators--- and remember how only a few months ago, people were so aggressively fighting that idea, right here on our show. Remember that?
So the depression never came, and now you and everyone else have confirmed that the economy is actually improving. Cisco sees strong results, everybody sees stronger results. They come out with windows 7 and computer sales are up like 40%.
That’s not what happens in a depression or even a downturn. That’s a strong recovery, like the one Banerji called for months ago right here.
Well you have an improving economy, and everybody knows there is an improving economy. So prices are roughly in the right range. So now, they can move up and down in a channel.
Do you know what a channel is? You draw 2 horizontal lines and have a squiggle going up and down between them and when it gets around the line, it turns and goes the other way.
This isn’t really a movement at all, its vibration. And now since the world has caught up with reality, prices can bounce around, feel like they are moving, but in the long run go sideways. So for now, you can make a little money by buying fear and selling happiness. But until people get too pessimistic, or things turn ugly, the story is out, and it is harder to bet on.
Is the story of global growth out? Sure, right now. But these things are very volatile. VERY volatile! What things? Well, Chinese stocks, Malaysian, Philippines, Taiwan, and Brazil. They are uncertain and they move a lot.
So when they feel overbought, get a little bad news. The dollar snaps back or something like that, you will get a HUGE backup in those foreign stock prices. And most people will forget how certain they are about long term growth in the China Region. Totally forget and sell out, get whipsawed. Lose money!
So when they do, you and I will stare at each other in disbelief, as the world forgets what it knows so well, that growth is assured for several years in that region. They will forget, we will remember. We will be scared, won’t feel like taking action, will feel like following that herd. But we won’t!
We will buy those foreign stocks at that time. Is it Easy, for the average person? No because that investor 1.0 feels good when he is doing what the people around him are doing. He feels uncomfortable when making the move on his own.
So investor 2.0, the new evolved investor who is my student, does he feel comfortable? Nooooo!!!. Investor 2.0 is free because he knows he doesn’t have to be comfortable. If he wants to be comfortable take valium.
Investor 2.0 knows if you’re comfortable, you don’t understand the game. So why do I buy so many bonds? Bonds are easier to make money with usually, if you have the right kind at the right time.
But the key is, when you are assured of safe profits, you can afford to be VERY choosey!
Daniel Frishberg
Thursday, November 5, 2009
Tuesday, October 13, 2009
Monday, October 12, 2009
Is our Economy being run by kids or adults?
“You know something is happening and you don’t know what it is, do you Mr. Jones?” Bob Dylan
We are now running our economy like a bunch of kids with the parents not home. Our audience is made up of experienced businessmen, students of the economy and just plain people with common sense. They can see bad decisions being made, and they can’t figure out how so many apparently good things can possibly be happening. How could we be having unlimited money printing, quantitative easing, deleveraging, rising structural unemployment, soaring gold prices, while happily and complacently collecting money in a continuing stock market rally? These points just don’t go together. The cognitive dissonance is deafening.
Here’s the explanation:
Temporarily, and probably by sheer luck, we are experiencing a rare moment of balance. Global deflationary pressures are offsetting the wildly inflationary activities of the U.S. government, which they are carrying out with the willing consent of the American people, including you and me. It is just a rare coincidence that these opposing forces are lining up so beautifully right now. These opposing forces are pressing in opposite directions so they cannot continue to line up and they won’t.
Global deflation will diminish as countries around the world recover and begin to grow. Pay levels will continue to decline because there is a growing supply of people around the world, willing and able to work cheaply-but-effectively. As economies around the world continue to recover and expand, the prices of most other building blocks of society will rise. This growth will overcome cheap labor, and deflation will slow.
On the other side, our inflationary activities will not slow of their own accord. It would be really painful, like kicking heroine cold turkey, to stop trying to print and borrow our way to prosperity. I don’t see the leadership, the vision or the wisdom out there right now to guide U.S. policy to a rational course. That will have to come by speeding up to the edge of the cliff, and stopping just in time… or not. I am not predicting irreversible calamity, but investing whether in anticipation of calamity or near calamity requires the same actions, which I am taking.
While preparing to benefit from potential adversity later, things are pretty good right now. It would be a mistake to pass up today’s opportunity. In the face of rampant skepticism, the economy has been steadily improving for months, and our leading indicators tell me the improvement will continue for at least several more months. With investors still excessively pessimistic, we will continue to make money placing our bet on stocks associated with global growth. Timing will be key, though, because the rare moment of balance is a beautiful and profitable opportunity but it is only temporary. This is the moment for the grasshopper to dance in the sunshine. Winter will be here soon enough, but to live a life of joy, one must also learn to live in the moment.
After the growth scenario runs its course, we’ll be in a better position to see whether the U.S. economy takes its trading partners down with it or not. They appear to be growing independently. We’ll see.
Raw materials prices will rise assuming continued global growth. The question will be whether companies in the materials businesses will see their stocks tumble even while the prices of the commodities themselves rise. This would be caused by simple fear and reduced willingness to assume risk. If the definition of “flight to quality” changes into holding commodities to avoid inflation and raised income tax, you could see commodity prices rise, while the stocks of companies who deal with them decline. We’ll see!
For now, U.S. stocks rally, as the economy continues to surprise to the upside – at least a couple of more months.
We are now running our economy like a bunch of kids with the parents not home. Our audience is made up of experienced businessmen, students of the economy and just plain people with common sense. They can see bad decisions being made, and they can’t figure out how so many apparently good things can possibly be happening. How could we be having unlimited money printing, quantitative easing, deleveraging, rising structural unemployment, soaring gold prices, while happily and complacently collecting money in a continuing stock market rally? These points just don’t go together. The cognitive dissonance is deafening.
Here’s the explanation:
Temporarily, and probably by sheer luck, we are experiencing a rare moment of balance. Global deflationary pressures are offsetting the wildly inflationary activities of the U.S. government, which they are carrying out with the willing consent of the American people, including you and me. It is just a rare coincidence that these opposing forces are lining up so beautifully right now. These opposing forces are pressing in opposite directions so they cannot continue to line up and they won’t.
Global deflation will diminish as countries around the world recover and begin to grow. Pay levels will continue to decline because there is a growing supply of people around the world, willing and able to work cheaply-but-effectively. As economies around the world continue to recover and expand, the prices of most other building blocks of society will rise. This growth will overcome cheap labor, and deflation will slow.
On the other side, our inflationary activities will not slow of their own accord. It would be really painful, like kicking heroine cold turkey, to stop trying to print and borrow our way to prosperity. I don’t see the leadership, the vision or the wisdom out there right now to guide U.S. policy to a rational course. That will have to come by speeding up to the edge of the cliff, and stopping just in time… or not. I am not predicting irreversible calamity, but investing whether in anticipation of calamity or near calamity requires the same actions, which I am taking.
While preparing to benefit from potential adversity later, things are pretty good right now. It would be a mistake to pass up today’s opportunity. In the face of rampant skepticism, the economy has been steadily improving for months, and our leading indicators tell me the improvement will continue for at least several more months. With investors still excessively pessimistic, we will continue to make money placing our bet on stocks associated with global growth. Timing will be key, though, because the rare moment of balance is a beautiful and profitable opportunity but it is only temporary. This is the moment for the grasshopper to dance in the sunshine. Winter will be here soon enough, but to live a life of joy, one must also learn to live in the moment.
After the growth scenario runs its course, we’ll be in a better position to see whether the U.S. economy takes its trading partners down with it or not. They appear to be growing independently. We’ll see.
Raw materials prices will rise assuming continued global growth. The question will be whether companies in the materials businesses will see their stocks tumble even while the prices of the commodities themselves rise. This would be caused by simple fear and reduced willingness to assume risk. If the definition of “flight to quality” changes into holding commodities to avoid inflation and raised income tax, you could see commodity prices rise, while the stocks of companies who deal with them decline. We’ll see!
For now, U.S. stocks rally, as the economy continues to surprise to the upside – at least a couple of more months.
Tuesday, October 6, 2009
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