First off, good morning. My new approach to life is to make “good morning” the first thing I say in the morning. With all the “stuff” going on in my life (and perhaps yours), a positive start to the day is a good thing, I believe.
A positive start to the market is a good thing as well, and the opening this morning is a bit surprising, as some commentary from the media suggests Mr. Bernanke’s stance of tapering QE has not changed one iota.
- Stock indexes advanced modestly at the open on Wednesday, after U.S. Federal Reserve Chairman Ben Bernanke reiterated the central bank’s plan to begin to scale back its bond-buying program later this year.
One could think the market no longer cares if Mr. Bernanke begins tapering off on QE later this year, based on the opening this morning. Then again, every word the man says is parsed and analyzed to a single degree, so maybe the market feels his words are still suggesting accommodation.
- Benchmark 10-year note yields fell for a third day as Bernanke said in prepared testimony before the House Financial Services Committee the accommodative policy “could be maintained for longer” if economic conditions warrant.
And yet, still again, the market has now gone into the red, and it looks to be heading back into the green, so maybe it is as confused as the media is about the Fed’s intentions. Then again, again, maybe the market is clear about what is going on and it has no issues.
- Yields on the 10-year note rose to 2.75 percent on July 8, the highest since August 2011, from a 2013 low of 1.61 percent on May 1. They remain below the five-year average of 2.74 percent.
As I write, the yield on the 10-year Treasury bond is now 2.47%, which is a half a percent lower today than it was yesterday and considerably lower than it was on July 8. My guess is investors are okay with whatever Mr. Bernanke says and means. Again, again, and again, let’s all just move on from the QE tapering nonsense.
Instead, let’s take a trip to China where most everyone but investors believes the economy is just about ready to completely fall apart.
- Foreign direct investment in China in June jumped 20.12 percent from a year ago, the Commerce Ministry said, the quickest gain since March 2011, showing that investors are still confident about the world’s second-largest economy even as growth slows.
How does the above happen when the constant drumbeat from the media is run, run as fast as you can from that sinking ship?
- China drew $14.4 billion in foreign direct investment in June the ministry said on Wednesday, while in the first half, FDI totaled $62.0 billion, up 4.9 percent from the same period of 2012.
I suspect smart money players know that more often than not a play contrary to what the media is pounding is a good play. So, if you want to make your money work, as the big money folks do, consider the substantive action of investors in the midst of the negative media barrage about the Chinese economy.
- FDI is an important gauge of the health of the external economy, to which China’s vast factory sector is oriented.
Okay, so the market is now solidly in the green. Maybe, just maybe, today’s words from the big man at the Fed will let us all just go back to the fundamentals of investing and trading. One of those fundamentals is “ignore the media and look to the fundamentals.” Never forget that in the end, the market cares more about actual revenue and profit than it does about the media highlighting speculation from the analyst class about the Fed’s future intentions.
Trade in the day; Invest in your life …
