Monday morning and the market is showing a bit of oomph. Out the gate and up the hill it flew. Just like that the S&P climbs above 2000 and the Dow inches closer to its all-time high. This should tell you something – the market wants to go higher, even if Germany is tripping up a bit as the economic leader of Europe.   

  • The IFO Business Climate Index in Germany for the month of August shows that business sentiment declined for a fourth consecutive month.

The Russia/Ukraine business is accountable for part of the drag, as it is accountable for some of the drag on the market since late June. There is an economic war going on, after all.

  • German electrical and electronic exports to Russia fell 19.8 percent in the first half of the year.

The news is not all that bad though. The confidence level dropped marginally, sure, but folks are still working in Germany.

  • Gauges of German manufacturing and services slowed less than analysts forecast this month. The number of people out of work declined in July and the jobless rate held at a record low.

So, there you have it – my take on the bad news of the day. It ain’t that bad and the market seems to agree. On to something else …

I am pretty sick of the historical market analyses coming out these days. For all you folks who are new to the game, understand this. The market is what it is today, not what it was back in 1900, 1920, 1930, 1940, 50, 60, 70, 80, 90, or 2000 for that matter. So, any comparisons, mathematically derived or not, mean little.

David Moenning over at State of the Market does a fine job of debunking one such historical comparison – Robert Schiller’s suggestion the market is overvalued based on market history since 1900. It is worth the read, but here is one takeaway that provides one clear example of why using historical comparisons as metrics for today’s market means little.

  • Back in the day, corporations provided their employees with defined benefit pension plans. Those days are now long gone as the 401(K) plan has replaced the pension plan. Therefore, individuals are putting more and more money into the market, with most of this cash being allocated to index funds. In short, this has created higher demand for equities over the years as new cash comes in – month after month – that needs to be put to work.

In the “old” days, pension funds and other such institutional investors led the way in the market. Today, they are still big players, but the fact of the matter is that mutual funds and hedge funds are the big players, and that makes the game much different than it was. Money does need to work, and when it flows as it is flowing in this “era,” well, equities are the happy recipient and will continue to be so, as long as they are fairly valued in a current context.  

  • As a generalization, stay away from the self-confident talking heads who display little rigor and whose knowledge base is 3 miles long and an inch deep. They are often wrong but never in doubt.

Doug Kass wrote the words above. I love them. He was referencing Barry Bannister, the former uber bear from Stifel Nicolaus, who just converted from a bear to a bull. Well, not just to a bull, an ultra-uber bull. He now has a higher-than-anyone, year-end price target on the S&P (2300).

Mr. Kass makes this point – Bannister came on CNBC with his new “analysis” and he never even mentioned he was wrong about the previous bearish analysis. In other words, these celebrity analysts are so high on themselves they cannot see themselves as wrong. They are emperors with no clothes. Where is a child when you need one?

  • Never rely on talking heads to determine your strategy and individual stock selections, and that includes me. Always do your own homework. Get advice from multiple channels, and always consider always your risk profile and time frames.

Kass gets it right, and so should you, if you follow his advice above and if you heed his words below.

  • Answers are garnered through hard-hitting research, analysis and logic of argument. And even when the analysis is well done, the timing may be off. This especially applies to the contrarian who can suffer from shortsightedness or farsightedness.

The market is holding on to green this morning. I guess the flow of money favors equities, despite bad geopolitics, a struggling Europe, and an historically “rarified” market. How about that Barry Bannister?  He is one smart guy!

Trade in the day; invest in your life …

Trader Ed