Eight-four years ago today, the US began to unravel financially, which led to an unprecedented depression that lasted some seven years. The government efforts to alleviate the pain helped stave off total disaster, but the economy still slogged through the up and down of a slow and uneven recovery. It took the ramping up of industrial production for WW II to help the US turn the corner toward the largest economic expansion in the history of the world.
Arguably, the financial collapse that began in 2008 with the fall of the Bear Stearns and the Lehman Brothers “banks” was actually far worse than the banking collapse that began slowly with Black Tuesday and rolled right through 1933 when an estimated four-thousand banks went under. The reason is simple.
In today’s world, the US financial system, along with AIG, which insures the financial world, are so intertwined with the financial systems of the globe that a US failure means a global failure, which was exactly what happened. Aside from China, the world collapsed and, today, the slow and uneven recovery continues.
- The Industrial Productivity Index ratcheted up 0.6%, from 99.5 to 100.0, while capacity utilization improved from 77.9% to 78.3%. Both are now at levels not seen since 2008.
Although the market does not see the above as glamorous or particularly relevant numbers, they are, nevertheless, relevant numbers.
- While I know capacity utilization and industrial productivity aren’t exactly the market’s most-watched economic data nuggets, for true long-term investors, I’ve yet to find a more reliable and telling set of data. As long as both of them are rising, so too is the market. When both or either start to stumble, however, that’s usually a sign of bigger-picture problems for stocks. The correlation is very strong.
The quote above is accurate and meaningful. I have seen the data, and for those who would like to read it for themselves, here is the link.
Don’t let the title of the article mislead you. I was drawn to it after Apple’s earnings came out last night and the results were less than satisfying for those who play Apple. I wanted to get another perspective on the market movement for Apple. In any case, even if the Apple players wanted more, the company still did well, especially with US consumers.
- “We’re pleased to report a strong finish to an amazing year with record fourth quarter revenue, including sales of almost 34 million iPhones,” said Tim Cook, Apple’s CEO.
One last thought for today – the uneven economic recovery of the 1930s is similar to what we have going on today. It takes time to recover from epic financial stupidity, but the fact is the US is recovering and will continue to do so, right into another great economic expansion. In the meantime, though …
- While Q3’s numbers have been decent, traders are becoming more and more wary of what’s to come in the fourth quarter and beyond. Those question marks are only going to fuel indecision rather than quell it, at least until we get some more clarification in terms of future earnings.
The above is right on target. Until the Fed actually begins its tapering and until the economic data steadies into a stronger flow, and until employment reaches substantially higher, the market will behave as the US economy behaves – slow and steady with minor jolts here and there.
Trade in the day; Invest in your life …
