Today is one of those days. My morning reading has produced so much interesting, helpful, and educational material it makes it difficult to focus on a single thing. For example, I find it interesting and educational that Bill Gross is still singing his recent negative tune about stocks to attract folks to his leaking ship.
· Bill Gross, manager of the world’s largest bond fund at Pimco, said Wednesday the likelihood of 2 percent future cash returns indicated that, while assets are not in a bubble, they would deliver lower returns in future years.
Interesting in that it demonstrates the breathless media’s penchant for the hilltop screamers preaching about the coming doom and educational in that it demonstrates how celebrity analysts will forgo the evidence and sit tight on their outlandish predictions to 1) achieve a desired outcome, such as keeping a leaky ship afloat 2) move a market or the market, or 3) simply avoid having to admit he or she is wrong.
· The world’s top investors added exposure to equities this month and cut bonds and cash as they grew increasingly confident that geopolitical tensions are unlikely to derail the global economic recovery, Reuters polls showed on Wednesday.
The reason for the above and the reason Bill Gross is wrong, at least in the near term, is today’s economic data … Oh, BTW, I don’t mean the numbers from the first three months of this year, which told us the US economy suffered last winter, a fact we already knew. No, I am referring to the following current data.
· The Chicago Purchasing Managers Index (PMI) for April rose to a reading of 63.0, which was well above the consensus expectations for a reading of 56.7, and last month’s reading of 55.9.
· The New Orders component came in at 68.7 vs. 58.8 in March.
· The Employment component was reported at 57.8 vs. 50.0 last month.
· U.S. Consumer Spending on Services Shows Biggest Gain Since 2000
The above is helpful in understanding why the market has recently been working hard to shrug off the winter blues. Now, understand the above is not the only data coming out that suggests Bill Gross is wrong.
· Globally, consumer confidence returned to pre-financial crisis levels in the first three months of this year, at its highest since the first quarter of 2007, the survey by global information and insights company Nielsen showed on Wednesday.
Now, contrast the above with the news that pushed the market down this morning.
· U.S. stocks opened lower on Wednesday after data showed the economy grew at a sharply lower-than-expected pace in the first quarter.
True, even though the aforementioned leading data (global consumer confidence) is far more helpful in understanding the market than the lagging data just mentioned, it is educational to note that the market is struggling to get into and then stay in the green today.
Why is the market struggling today? Because the market is still thinking about its winter blues, it still has angst about Ukraine, and it is still in an ambivalent state from the breathless media’s relentless recent pounding about the over-valued market and the now “news” about the probability the Fed will cut another $10 billion from its monthly bond purchases, bringing that total to $45 billion, which is almost half of the original $85 billion.
It is interesting, helpful, and educational to note that the market still has some residual belief in one of the favorite mantras of the hilltop screamers – the only reason the market is up over the last five years is because of the Fed’s loose monetary policies and as the Fed eases those policies, both the US economy and the market will falter badly.
As I have written, the Fed’s policies have tremendously helped right a severely listing ship, but in no way are its policies the sole reason for the market’s resurgence over the last five years. The fact that the US and global economies have stubbornly persisted in moving forward is the primary reason for the market’s health.
· Consumer confidence was highest in the Asia Pacific and Indonesia was the most upbeat market globally for a fifth straight quarter, followed by India.
Yes, today’s reading makes it difficult to define that which is most interesting, helpful, and educational, but, nevertheless, I think I have managed to cull a few interesting, helpful, and educational points for your consideration. For example, I find it interesting that Google is doing R&D in futuristic cars.
· Google said it has begun testing its self-driving cars on city streets, a crucial new phase in its quest to eventually make the technology a standard feature in automobiles.
I find it helpful that other financial writers espouse the same important notions that I write about.
· Being aware of differing points of view can make you a much better investor than one who relies on two-minute sound bites to form their investment opinions and make decisions.
Finally, I find it educational that other writers point out information that is necessary for success in playing the market.
· Successful investors should read across a wide range of subjects besides markets. Success in the stock market has as much to do with understanding psychology and probability theory as it does accounting and economics.
Yup, today is an interesting, helpful, and educational day in my world, as is every day, or so it seems.
Trade in the day; invest in your life …
