The Dow Jones Industrial Average

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