A friend of mine, who must remain anonymous due to his compliance requirements, builds furniture as a hobby. Years ago he told me that he could use carpenter activity as a market indicator. Here is what he sent me recently:
“Historically it has been anywhere from a six to nine month lag from the time auctions of cabinet/woodworking equipment peak and when housing bottoms. We appear to be getting close to peak in equipment sales. Its not a fancy thing but it has worked better than any government stat I have seen!”
Where he gets his data is an unknown to me, a desk jockey in NY. But it sure does make sense. People will eventually have to give up (sell their equipment) when things get really bad. In the markets, we call that capitulation. In real estate, boy would I like to have deep pockets and buy up big chunks of property for a song. How about a company on sale?
A few years ago, we knew it was a bottom in commodities prices when Merrill Lynch shut down their commodities trading operation. Capitulation.
And we can see similar stoopidity (don’t want to slander anyone) in market budgets, R&D budgets, employee hires and any other area of business expense that gets cut back just when it is needed most.
If you can find a stock of a company that is spending money to gain market share, go for it. Hopefully, we chart readers will see that activity on volume or price action or simple resilience in the face big price declines.