Trying to gauge where the economy is headed is almost always a waste of time…[Instead,] most successful businesses…are looking at what they have to do to improve their business. In today’s age of hot money, there are two options on the table:
The comments above and below are edited ([ ]) & abridged (…) excerpts from an article by Sol Palha(TacticalInvestor.com) to provide a faster and easier read.
- Work hard and try to produce a better product or come out with something new that will replace an older product or service and offer it at a better price…[or]
- borrow large sums of money and buy back your shares and magically improve your EPS without doing anything extra. A large number of corporations are focussing on this option as it’s a very easy for corporate officers to reap in large bonuses without doing anything.
Naysayers rant…[off] a list of negatives…[such as] the following:
- The current economic recovery is the weakest on record since 1949;…
- How is this data supposed to help you regarding investing in the market? It can’t because it tells you nothing. The economic recovery has been weak for years…and yet each year the Dow trends higher. If this data were relevant and investors paid attention to it, then the market should have crashed and should have been putting a series of lower lows.
- The dollar is weakening;
- Weren’t experts claiming that a strong dollar was bad for the economy and how did that argument work out? Why would anyone pay attention to this nonsense? In reality, the dollar is still much stronger than it was back in 2010. There is no such thing as a strong dollar or strong Euro; it’s all relative as the world is locked in a competitive, currency war. In this war, there is no option but to devalue or die.
- Weak economic growth;
- Another useless…[statistic] that has no bearing on market direction; if it did the markets should have crashed already; instead…[they are] trending higher. This data can be revised upwards and next month growth rates could come in higher than expected. All this data is manipulated anyway so why the focus on any of this nonsense.
The only two things that matter are emotions and price action.
- The crowd is still extremely bearish, and
- price action is positive.
Translation: markets will experience corrections ranging from mild to wild; these pullbacks should be treated as buying opportunities.
We could also use data (manipulated) to create a bullish picture;
- wages are rising,
- unemployment has dropped,
- energy prices are lower, and
- inflation is non-existent.
However, this data is as equally meaningless as the data used to come out with projections for where the economy is heading.
Economic growth (GDP) and market performance not related especially in the era of “hot money.”
The last eight years are a perfect example. On its best day, this economy can be compared to a plane flying with one engine; the second one is not working. The plane needs both for optimal performance, but it can still continue operating with one. Mass psychology clearly illustrates that markets top when the masses are euphoric; how did the housing bubble end. It did not end on a note of panic but a note of euphoria.
Don’t waste time pouring over useless economic data; all the data is twisted anyway so what sense can you hope to make from it. Focus on the emotion and trend (price action); the trend is always your friend…