It’s early, early in the morning, way before the market opens. As I ponder the day, me thinks the market will take a breather today. The headlines are blaring about the rise in jobless claims, the drop in housing starts, and how Walmart’s profits missed expectations because of weak US sales. On the other hand, home-building permits are up, jobless applications are at a five-year low and the economy has added 208,000 jobs per month since November, and, Walmart, well, I don’t know. Maybe folks are buying more American these days.
And then there is also Japan and the market itself. Both or either could pump up the market or send it off to take a little nap today.
- Japan’s gross domestic product, the broadest measure of goods and services produced across the economy, grew at an annualized pace of 3.5% in the first three months of the year, as consumers loosened their purse strings and exports to the U.S. picked up
- The overall market showed further signs of strength despite the S&P 500 rising to a record for the fourth session in a row. The broad market index has recorded 15 new closing highs this year.
Wow! Fifteen new closing highs this year seems a bit excessive, but, then again, as I have been writing, the market most always knows what it is doing. Just imagine if Japan gets back to being a player in the global economy. Just imagine …
Does anyone remember the name, Marshall McLuhan? He was a philosophical icon back in the 1960s and he said a lot of thoughtful stuff that kept the period thinkers on their toes. Anyway, he said there are not two sides to a story; there are forty or more. He is right and I finally figured out this is the reason the breathless media comes off as so negative, or, sometimes, like a door-to-door salesperson selling only good stuff. It cannot possibly report all of the angles to a story, so it only reports those angles that will sell the story. For example, if you only read the following, you would think you should divest from or short the auto sector, or the economy is tanking again.
- An increase in auto repossessions due to borrowers defaulting on their car loans is raising new questions about whether the auto industry is going too far selling new cars and trucks to those with subprime credit records.
Well, the reading of the above has a certain appeal to those who seek out the negative, but another side to that story is the following.
- “I don’t think there is need to be concerned with the industry right now. We are seeing slight increases in delinquency. However, they are still at historic lows,” said Melinda Zabritski with Experian Automotive. “Despite a slight increase in delinquency, the charge-offs when they do occur are lower today than they have been in years.”
Experian automotive did the research and put out the news, so one should give some credence to them when they tell us things are not as bad as the former sentence indicates. One should also take away from their analysis that as the economy grows, so will the auto sector, which means more profit, which means you should be looking at the cheapest of US automaker stocks – Ford. What a bargain that stock is now.
As to the market, well, it opened as I was writing the above and it is not showing signs of running for the hills. In fact, it is flat as I write. A down day would be good, though. A little something to throw off the sniffers, the folks that keep telling us to watch out, the market climb is not real. Then again, another side to that story is the following.
- In signs that the rally may strengthen from the current levels, the Credit Suisse Fear Barometer, known as the CSFB Index, fell 11.4 points over the past two weeks – the largest decline on record – and is now at a one-year low of 21.73.
- The indicator essentially tracks the willingness of investors to pay for downside protection with zero-premium so-called collar trades that expire in three months, using S&P 500 index options.
I don’t know what the above portends for the market, whether it really is a sign that the market will keep on heading higher. What I do know is that I, for one, believe the market will keep going higher because there are more sides to the economic story that point to growth than not. And that is all we can do – gather all sides and then make a reasoned conclusion.
Speaking of cars … I need to get in mine to drive the 13 hours back to California. I hope they did not repossess it while I slept.
Trade in the day; Invest in your life …
