And the beat goes on … The market keeps climbing higher and the breathless media keeps asking “Based on what?” Optimism … hope … greed … are reasons given for the market’s continuing rise into unexplored territory, but none of those three accurately reflect the reality of the market’s rise. I have expressed my thoughts on this – the market is rising because earnings are in line despite the revenue shortfalls, global economic growth is slow and stilted but moving forward (save for a recovering Europe), the global issues that have kept the market in a perpetual state of fear are abating, and the US consumer is still in the game.
“Yes, but the climb is on the back of weak volume, so there is no support, and since it is already top heavy, it will come tumbling down,” the voices tell us. Sure, that is possible, as anything is possible, but the fact that volume is weak does not mean the market will fall precipitously. It would take a catalyst to turn the market upside down. What could that be?
Putting aside any unforeseen geopolitical flare up, such as Israel going to war with Syria or Iran, and North Korea doing something really stupid, the US politicos acting out again, or the EU suddenly disintegrating from who knows what, there really is nothing fundamental out there that could radically alter the current market context.
Some argue the Fed pulling out of QE would be catastrophic for the market, and that might be true if that action were suddenly hurled upon the market with no foreshadowing, or it were announced that the Fed would be withdrawing its stimulation sooner than it has stated it would. Neither is likely, given the steadfast nature of Ben Bernanke.
No, as always, market movement will come down to earnings, global economic growth, and consumer confidence. As long as those remain within expectations, the market will move forward, trade sideways, or correct 5%, give or take, but it won’t collapse. A lot of money has come into the market this year, and a lot would have to come out to turn this bull market into a bear market. Simply, there would have to be a compelling reason for those investments to pack up and leave.
- Six years after the start of the foreclosure crisis, American homeowners are paying their mortgages like the housing crash never happened. First-time delinquent home loans fell to 0.84% of the 50.2 million mortgages in March, the first month below 1% since 2007.
Okay, we can take housing off the list of potential party crashers. That ship of destruction has officially sunk. To those who scream about a housing bubble, I say, “Seriously?” No, the fact that the housing industry is stable and growing with no signs of overheating is a testament to the US consumer’s view of the current economic state. No, there is still “gold in them thar hills,” so hang in there.
Equities are moving in the market, but what about those commodities? A look at commodities today shows much more red than green, which corroborates the recent trend toward bearishness in the commodities realm. Gold is stuck in the low end of its recent range, oil is relatively flat, and grains, are, well, grains, commodities subject to instability. So, then, the question I recently received is quite interesting.
- Looking at moves from bigger wallets like Soros and others. They are moving from equities to commodities. Is it too early for the smaller wallets to do the same for wheat and corn ETFs?
I don’t trade commodities, but I do follow them and I know two things when it comes to Mr. Soros and commodities. I know that back in January he spoke bullishly about commodities.
- Billionaire investor and retired fund manager George Soros says the decade-long commodities boom could last another couple of years …
I also know that he sold off large chunks of his gold holdings in the fourth quarter of last year, and again in February and March, but as of April, he started talking gold up. Can one say “contradictory?”
- George Soros, who called gold “the ultimate bubble” in 2011, reduced his position in SPDR Gold by more than a half to 600,000 shares in the fourth from 1.32 million in the third quarter.
- In the interview, Soros makes some somewhat contradictory comments about gold. Soros said regarding gold that he did “not expect gold to go down …”
Currently, I don’t know for certain what the “big wallets” are doing with non-gold commodities, but my thinking is if they are moving money into non-gold commodities, it is because they believe they are priced attractively. Unless they are shorting everything, they must believe the global economy will keep moving forward, which means higher demand, less supply, and higher valuations. So, if you believe that these big-money players know what they are doing, then follow them.
Thinking about this question, I have to ask, “Would you invest billions in a trade you thought would go bust?”
Trade in the day; Invest in your life …
