We all recall playing with spinning tops when we were kids….if you are over 50. These days, kids’ toys are far more advanced than wooden tops that spun around in circles in one place until you fell asleep – or they toppled over.
Speaking of Spinning
This week’s data on the US portion of the global economy was – in several channels – far more upbeat than one would have expected from listening to the media noise in the peanut gallery.
That stream of stable data ended with this morning’s employment report – again better than expected. More jobs, more income, more future purchases – more growth – even if slower than desired in a perfect world. By the way, as referenced earlier this week – there is no perfect world – nor should we wish for one. If we got it, what would we do next?
That is a thought for later – now back to spinning tops.
As You May Have Guessed
The ink had not yet dried on the employment data release when, not surprisingly, an entire flock of Black Swans clouded the picture.
In seems (see if you can follow me here) that the data has mustered up this new impression from the batch of the latest experts:
Last week, the world was on the precipice of decline, sitting on the edge of oblivion due to a strong dollar, weak oil, no global demand, loss of productivity, an earnings recession and of course, the complete and utter collapse of China (still producing the equivalent of a new Greece economy every year). That was all bad of course – and made even worse because the fear was still that the Fed did not get it and would still raise rates, driving us into Depression.
And, to cap that all off, if you were not afraid enough of the risk of another rate hike, the experts told us what would be even worse: The economy was still so weak that the Fed would have to go to QE and completely reverse their rate hike, sending us all into the same black pit.
While these chuckle heads spin back and forth between these dire (nearly opposite) scenarios, you are seeing (I hope) that there is no right answer. There is no correct outcome. Nothing that can be just “ok”. There is no threading the needle, missing the mountain or avoiding Armageddon.
Back to the Latest Data
Now, of course, an ENTIRE 100 hours later – the world we face has once again changed – and all for the bad.
Crude has bounced from $26 (the end of the world because of deflationary spiral) to $34 (a 30% increase and a sure ignition to massive inflationary forces driven by QE, 1, 2 and 3).
The Beige Book was pretty stable – so were retail sales and personal income (oops that’s bad because the Fed is in a jam – raise rates and send us into Depression Act II – or go to QE and have inflation and bubbles spiral out of control in every direction?) Notice again, there is no good outcome.
ISM data was – yep – better than expected
Meanwhile, the caper was the “all feared” employment report here in the US. It too was more robust than feared – and now?
Yes indeed, the world is a dangerous place. Fraught with all sorts of new problems.
The New Spin Soon Goes Something Like This….
“You know, the employment data is strong, oil has hit a low, commodities are screaming back as costs will begin to pinch corporate profits. On top of that, the FED cannot, in any manner, now back off those interest rate hikes. This will clearly lead to a strong dollar, further depressing US profits and causing even more global turmoil. The Fed is in a jam, in a pickle and there is no way for them to turn now. God help us all….buy gold and be ready for a massive correction as profit margins will continue to be squeezed.”
I think I got it all in there.
You see the spinning top?
You see the process moving from one set of massive problems to a new set of massive problems – no matter the data? Assure yourself of this: IF the data received this week was precisely opposite – and mostly bad – the new spin would have also been opposite – but still all bad.
What to Do?
First, here is what everyone else is doing:
Thomson Reuters tells us that the January data is in on mutual funds – and selling was at record levels:
“Investors yanked more than $60B from mutual funds in January, the most outflows in one month since September 2008. This took place as stock markets suffered their worst January in 20 years.”
This also in this morning from BAML:
“For the week ending March 2, investors poured $5.8B into bond funds, the largest weekly amount on record.”
I am hoping you got a chance to review that video earlier in the week on the market structure.
If you did, you would see that we have now entered that price range where the resistance to this bottoming effort will more likely be tested. I would not at all be surprised to see – and hope we do – some setbacks here in the next few days.
Just an idle and shallow pause, on lower volumes for a few days – would suggest this market is far stronger than the masses understand or the “experts” anticipated.
No pause or flat action as the frenzy to cover shorts wears off – and it will be telling us that the markets strength is even more significant and the underlying power is unfolding – driven by the very factors – the much larger picture we have covered for months.
The world is changing in massive ways.
Get tuned in to these larger events unfolding beyond the headlines.
The kids are taking over slowly but surely. They will change all we know. As the baton is passed in industry after industry, we can expect a few shaky periods.
THOSE are the periods of unrest we must focus in on and take advantage of as these powerful forces unfold.
Do not make the mistake of thinking too short-term and having emotional reactions.
Think instead of this:
If someone could walk in and promise you that the markets would be far higher ten years from now, you would use every dip to add to your holdings for long-term rewards.
Gaze at these charts below again as we sign off for the weekend. Tell yourself what you see.
What were those red dots?
And remember this:
In choosing between Faith in the future and fear of the future, our emotions ask the very same thing of us:
To believe something we cannot yet see.
Now, back to my coffee, TUMS (fruit-flavored again today) and my buy list praying for more dips….join me won’t you?
Here are those charts I promised….
Here is the deal:
The purple dot on the top chart and the blue dot on the bottom chart is where we are now – in this terrible place, this awful economy we are always told to be afraid of for one reason or a dozen.
One more thing – the top chart covers back to the 50’s – six decades. The bottom chart is a couple hundred years – both are riddled with problem after problem after problem…..