Can you believe it? It’s as if we were all abducted by aliens and placed in a different world, a world where good news has replaced bad and optimism has, well, if not replaced pessimism, made a small dent in the wall of worry, at least for today …
LONDON (Reuters) – World stocks hit a two-week high on Thursday and oil prices rose as optimism from strong U.S. and Chinese manufacturing data extended into a second day ahead of a euro zone interest rate decision and key U.S. jobs data.
In my morning reading, I came across news about pending home sales up (July) this week’s jobless claims down, U.S. August retail sales up, U.S. consumer bankruptcies down, and German car sales up. Is it just me, or does all of this seem like a yo-yo? Or better yet, does this ride we are all on seem like a roller-coaster ride?
I know, I know – a small spate of good news does not a healthy recovery make. I get it, but can’t a guy revel in the sunshine, even if the grey skies inevitably will return? Can’t a fella dream?
And then I came across an article in the Telegraph.co.uk …
Nobody knows what will happen next but the fact remains that interest rates on deposits are negligible – bank and building society savers would need several years’ risk-free returns to match yesterday’s gains on many shares – while the equity income funds tipped yesterday are all yielding more than 4 per cent net of basic rate tax; some of them much more. The more fundamental point is that while perennial pessimism is the easiest way to simulate wisdom in stock markets, it ain’t always the best way to make money. There is and will always be a chorus of wise virgins predicting the end of the world, but, it is worth remembering, they have always been wrong in the past.
I wholeheartedly agree with this perspective. Ultimately, business and markets are about one thing and one thing only – return on investment (ROI). If neither is producing a decent ROI, investors will keep their money locked up. Currently, lots and more than lots of money is sitting in cash or sitting in bonds that are producing minimal if any ROI. How long will this untenable situation last?
So, as the author of the Telegraph.co.uk article suggests, “perennial pessimism” may appear like wisdom in tough times, but at some point, those whose job it is to make money for others, and those whose job it is make money for shareholders, will have to stop listening to the “wise virgins” and start taking some risk. When that happens, well, who knows, but it needs to happen sooner rather than later …
Trade in the day; invest in your life …
