I am not sure what to make of this market anymore. One day, the European debacle trips it up and it drops, and the next it totally ignores the European downgrades and goes up. One day it opens on fear and the next it turns to economic fundamentals. Oh wait! Silly me. This is how it has been acting for years now …
Come March, European politics will be up for display. It is all coming to a head, as this past weekend, Merkel, Sarkozy, China, and just about everyone else who matters said this political nonsense has to stop and the Europeans need to get this issue contained and on the way to resolution. Pressure is mounting on Greece to get a deal done with its investors, so it can have an orderly default and be out of the picture. All in all, it is still a mess, but it is hard to imagine the whole process thus far going to waste. My bet is on the new accord between the 26 European nations and the ECB and other countries stepping up once that is done.
Regarding Europe, a long-time, intelligent, and sensible reader who has in the past contributed good things to this column has something to say. Normally, I outright agree with him, but this time, I have some small bones to pick with his assessment …
Keeping an eye on the data … Well this is always a good idea but the truth is the west just can’t compete with the east. This means investors have to become more global. There isn’t any chance of Europe doing well this coming year because wages are held low but companies insist on increasing profits to satisfy shareholders. This will trickle through to falling sales but not this year yet, and sooner or later, the work force will demand higher wages and that coupled with a desire for political and financial change in the world means that 2012 is not a good time to be in the market. Also tradition states that as January goes, so goes the rest of the year.
He does make an excellent point about investors having to be “global” in scope. The world is not the same as it was even 10 years ago. Markets interact with markets like never before, so along with being global in scope, one has to understand how markets affect markets across the globe. One has to practice intermarket analysis, or have software that does so one can keep up.
I am not sure what he means when he says that west cannot compete with the east, but he might be right in general about the economics of Europe. They have the same problem there as we have here – depressed wages for the middle class. The bone I would pick is that business can only squeeze workers for only so long, and the productivity drops, which has been the trend for some time now in the U.S. I suspect it is the same in Europe, which he says will happen, so no bone there, actually.
My friend also states that 2012 is not the year to be in the market because of the coming demand for higher wages and the political and financial changes going on in the world. I would argue just the opposite. I believe if you sit this year out, you might just miss a big bull run, and I say that because of the coming demand for higher wages and the political/financial change in the world. The rise of democracy in the Middle East and the changes coming in Europe could well generate more confidence in world markets, and rising wages in China and the U.S. would boost consumer spending, providing a catalyst to the cycle that is already turning to the upside.
Finally, if January is the barometer for the market, then so far the barometer is rising for 2012.
Trade in the day – Invest in your life …
