First things first this morning, I have two questions. Will the Dow climb above 17,000 tomorrow and will the Dow remain above 17,000? Actually, I have one more question – is this the beginning of the leg up that has long been in waiting?
I am sure the hilltop screamers are wringing their hands, wondering if they misread the predictive omens and the celebrity naysayers are swallowing hard, wondering how they will explain this latest misread of the market. As well, those who just generally say the market is overvalued and overbought are just shaking their heads.
- Much to the chagrin of those residing in the glass-is-half-empty camp (who, by the way, felt that May was definitely going to be their time), stocks have embarked on a new leg higher. The breakout to the upside, and then more importantly, the follow-through and confirmation by multiple indices, was a surprise to just about everyone in the game (well, to those that are honest about their prognostications anyway).
I like David Moenning’s take on things over at “state of the markets,” but I do have to disagree with his intimation that everyone was waiting for a major correction in the market. True, it seemed that way, as the breathless media pounded the idea that a correction was imminent, but, in fact, I read more than a few sober analysts in the last couple of months who suggested the market needed a bit ‘o rebalancing. Thus, the recent volatility was the market setting up for the next leg up. That was my position as well and still is – the market is going higher.
- The economy is going through a transition period in terms of its structural construction. America experienced one of these periods earlier in the twentieth century as we moved from an agricultural society to a manufacturing society. Now, the society is moving further beyond that manufacturing base to a society that is more information based, which some call a zero-marginal-cost society.
I agree with the premise of the above. The world is changing, and for this reason, the market will head higher. Simply, the change has been in the works since the dawn of the Internet, but it has progressed quite rapidly in the last five years. The next five years promise some leaps and bounds, even if leaps and bounds now seem like normal steps. Here I am referencing technological change that affects all facets of society, speaking of which …
The passage above references the zero-marginal cost society, which is the new society coming as defined in Jeremy Rifkin’s book, The Zero-Marginal-Cost Society. His major premise is that capitalism has reached its peak, and is now in decline, and that the reason for this is the world is becoming more collaborative because of the Internet.
Although the above is interesting table talk, the more important aspect of his book is what is replacing capitalism – producing goods for cheap and selling them cheap, or even giving them away. Two examples he gives (there are more) are what is happening in the book publishing world and the world of printing. In both cases technology has allowed independents to mass produce products and sell them cheap – eBooks and 3-D printing.
I agree with Mr. Rifkin on this and this is what I believe will inspire the market’s bull run over the next few years for sure, and possibly beyond that – more product availability for lower prices. You see, it is all about competition and money flow and for far too long, big corporations have controlled both.
Mr. Rifkin is right, their day is passing and what will replace that is a market putting money into the hands of individuals, not fat-cat executives and their private jets and yachts. Corporations will be forced to trim costs in order to compete, which will mean more value for shareholders. In fact, shareholders will be the big beneficiaries of the transformation. Individuals will have more money and individuals will spend that money on goods and services that the lean and clean corporations will produce. In short, this new world will bring more opportunity for the market, not less because the money will, effectively, be distributed more evenly across the board.
Just so you know, my thinking is not about the politics of capitalism vs. socialism, rather it derives from an understanding that when you give more people the tools (education, communication, and integration), more people participate in production (read: more entrepreneurs). The money flow becomes more diverse as it comes from many sources; it is not dependent on trickle down from the 1% of those who control it.
Hey! What the heck! It is Monday and the market seems to be solidly holding in the green, which means, if it holds today, the Dow could see 17,000 tomorrow. And if that happens, and it holds there for day or two, well, I have one more question – is the S&P 500 far behind in its next leg, which is passing 1700?
Trade in the day; invest in your life …
