I have written in the past when you find an analyst you like, stick with him or her. You don’t have to follow along blindly, but you should pay attention to what they say, as there is a reason you like that person. Recently, I have utilized excerpts from David Moenning. I read him because his take on the market is similar to my own, his analysis is sound, and his writing is compelling. This morning, the opening to his column struck me as profound.
- Okay, now it gets interesting. We had the run to new all-time highs in every stock market index save the NASDAQ (which for the record, still needs to gain more than 50% from last week’s highs to best its 2000 high water mark) – a run that has been unloved by many and outwardly hated by many more. We had our shocking sell-off, which has been predicted by the bear camp at least seventeen times so far this year. And now we’ve had our requisite bounce. So, what’s next?
So what is next for the market? Today seems to be a reaction to yesterday, as yesterday was a reaction to the day before. What, pray tell, transpired last night or this morning that would negatively alter the future economic picture?
- Stocks fell at the open on Wednesday after several disappointing earnings reports and another drop in commodity prices.
The floor on oil, gold, and copper is disappearing, but so what? That is all good news for the global economy. The breathless media is reporting that earnings for BofA and Yahoo were disappointing. The conclusion being that if financials and technical stocks are weak, the market cannot go higher.
These are the days that try market players’ souls. The market is partially unhinged, swinging wildly open and closed with the slightest breeze. There is unease in the market, a sense that the future is less than bright. I understand how we got here – the myopic and negative-oriented view of the media, the incessant need to view everything under a microscope rather than looking at the heavens through a telescope.
It is not just the market that has this tendency toward nearsightedness; we do it as a culture. It is not a good thing for anyone, especially those trying to make their money work. For example, let’s look at BofA. If you were to buy the breathless media take on this, you would be selling, as many are, but, if you want to make your money work over time, should you sell or should you buy?
- Bank of America’s profit soared in the first quarter, helped by mortgages and wealth management. But revenue fell and profits missed expectations.
True, profit missed expectations by two cents per share and revenue dropped slightly on an adjusted basis, but is it really a bad report for a bank coming off the destruction of 2008-09?
- The Charlotte, N.C., bank reported earnings available to common shareholders of $2.3 billion in the first quarter. That’s up nearly seven times from earnings of $328 million a year ago.
The above is not so bad, is it? And what about the data below?
- Bank of America Corp’s global wealth and investment management division was a bright spot for the No. 2 U.S. bank, which reported lower-than-expected overall results on Wednesday. The wealth unit reported first-quarter profit rose 31 percent from last year to $720 million, while revenue rose 6.6 percent to $4.4 billion. Bank of America said those figures were record highs for the division since the company acquired Merrill Lynch in early 2009.
I could go on about BofA as a project under reconstruction, a big bank almost through the arduous and daunting task of putting all the pieces back together after it fell off the wall, but BofA is not my point here.
My point is that the market is in rebalancing mode, and when in that mode, the bears take over and the sense of it all becomes negative and gloomy. Fine, it is what it is, but don’t get caught up in the flow of negativity. The market has a way of figuring this out, and, as I said two days ago when the Dow dropped 265 points, the bulls sees the “dips” as opportunities, and you should as well.
To drive my point home a bit further, consider the recent news about China (you know, its GDP tumbling, its momentum is declining etc. etc. etc.), in the context of the following information.
- Investors plowed $65 billion into Chinese wind farms, solar panel arrays and other clean energy projects in 2012, a 20% increase over the year prior, according to a report released Wednesday by Pew Charitable Trusts and Bloomberg New Energy Finance. The numbers reflect only private investments in power projects, and do not include government subsidies or R&D money.
Now, don’t you think those big-money investors would have been looking at the Chinese economy in 2013, 2014, and beyond? Now ask yourself, “Is the Chinese economy at 7.7% GDP growth a positive for the future or is it an omen, as the breathless media suggests and the market seems to have accepted. Think about it …
Trade in the day; Invest in your life …
