Who is in and who is out of the Dow is the big news of the day. In a world fraught with ubiquitous danger and a market seemingly always on the razor’s edge, this is interesting indeed and maybe welcome as well.
- A week of gains for world stocks petered out on Wednesday and a sell-off in oil and core government debt eased, as talks began on trying to avert a U.S. military strike on Syria against a broadly calm market backdrop.
Breathe in, breathe out is the mantra when working out. Although the market is not as rhythmic, it still practices the breathe-in-breathe-out technique. Today is an exhale after six days of inhaling gains. The gossip about Apple could be a reason for the exhale, but I suspect the market simply wants to reassess and evaluate, the NASDAQ especially.
Now maybe I am wrong and the market will get s second wind and run up into the green. If so, that suggests that tomorrow might be a better day for an exhale. Traders keep that in mind.
Okay, so the world is not on the precipice of all-out war today. What then is of interest to the market and to you, players in the market? China is always of interest, as many consider it to be the engine, the primary driver of the global economy.
- Long after concerns about tightening U.S. monetary policy have faded, a more profound issue will still dog global policymakers: how to handle the second stage of China’s economic revolution. The first phase, industrialization, shook the world. Commodity-producing countries boomed as they fed China’s endless appetite for natural resources. Six of the 10 fastest-growing economies last decade were in Africa
As I have written in the last two years, China is an engineered economy. True, all countries engineer their economies to a degree, but, of the largest economies, China is the one most controlled.
- To show it is serious about more sustainable growth, China deliberately engineered the first-half slowdown that unnerved markets in order to address its longer-term structural priorities.
China has been engineering an economic slowdown for longer than the first half of this year, but let’s not quibble. The important fact is that is the up and down of tis economy is no reason for the market freak-outs we have seen this year and last. Long-term stability is the goal, and my guess is that China will achieve its goal, looking at its record since the 1960s. Keep this in mind whenever the breathless media pounds on China’s drop in GDP. Contrary to market “wisdom,” incremental drops in Chinese GDP are a good thing, not a bad thing. Soon enough, the market will see and respond positively to this – a more stable Chinese economy showing steady but incremental improvements.
- There’s no reason to think that suddenly for the first time in history the market will never return. The market will keep on going up with the economy.
James Altucher said the above. For those who don’t know, more than a few market watchers consider the nerd-like genius “out there.” His prediction of 20,000 on the Dow strikes many as crazy, and maybe so in the timeframe he predicts (2014), but, and nevertheless, his take is an accurate one. The market does track economic growth and with China, Japan, the US, and, finally, Europe, on a growth track, the market will keep going up.
Thus, consider further advice from a somewhat nutty bull (Mr. Altucher) who believes strongly in his own market understanding.
- Don’t make your investment decisions on whether there’s going to be a drone attack on Syria. Find companies where there are deals or a lot of innovation, or trading “cheap” relative to earnings.
How right on is that? Even if many consider him “out there,” the above advice is as about as down to earth as it gets.
Trade in the day; Invest in your life …
