If one wants to learn about market movement, one has to come at that learning with a single context, a frame of mind that singularly focuses on two things – the market is forward looking and its singular concern is corporate profit.
All the rest is just flotsam churning in the current, debris bobbing in the waves, or, to continue the discombobulating water-movement metaphor, ripples from the breathless media tossing rocks into the pond. Phew! Sometimes my fingers just pull out whatever is in my brain at that moment.
Anyway, my point is, and it is not a new one, pay attention to the forward looking indicators, not the lagging.
- The Commerce Department said on Wednesday gross domestic product fell at a 0.2 percent annual rate in the January-March quarter instead of the 0.7 percent pace of contraction it reported last month.
Duh! Yet the financial news services still reports this “news” as if it really has any bearing on future market movement.
- A fairly stronger pace of consumer spending than previously estimated accounted for much of the upward revision to GDP. Consumer spending, which accounts for more than two thirds of U.S. economic activity, was raised to a 2.1 percent growth pace from the 1.8 percent rate reported last month.
Duh! Anyone with a reality-based perspective on the market knew this “news” was coming, as that same person would have known the next bit of prediction was coming.
- With personal savings increasing at a robust $720.2 billion pace as more Americans get a paycheck, consumer spending could accelerate in the second quarter. Spending could also get a boost from rising household wealth as home prices accelerate.
Duh! The above leading information has been around for some time, as the one thing that leads to corporate profit is consumer spending and the one thing that leads to consumer spending is jobs, and the one thing that leads to more jobs is corporate profit, and so the water spout spins. See what I mean about the brain thing. I think I have water on the brain.
Maybe it is the future-looking political drama I have been following for a while that is feeding the watery thinking. Actually, the politics of the deal is the drama now, but the reality is that if the deal gets done, and it looks increasingly as if it will, then major market opportunity will be coming to an ocean near you.
- The deal (Pacific Rim trade deal), potentially a legacy-defining achievement for Obama, would create a free-trade zone stretching from Japan to Chile, comprising 40 percent of the world economy and raising annual global economic output by nearly $300 billion.
Wow! Talk about a big deal. If this gets done, the world market will shrink yet again, the economy of scale for mucho products will escalate, and new markets in poorer countries will emerge as those countries develop a middle class.
I probably don’t have to explain this, but my earlier line, “coming to an ocean near you,” references the Pacific Ocean and the word “mucho” references the last big trade deal done back in the 1990s with Mexico as one of the participants, which, by the way, accomplished exactly what it was supposed to do – escalate both the economy of scale for “mucho” products and develop a middle class in Mexico, which back then was a poorer country.
Trade in the day; invest in your life …
