Friday July 27, 2012
I would not worry that commodities might become more undervalued because of a weak economy. The markets around the world are fueled on speculation driven by the differences in currencies, not the difference in economies. Hmm, that is a good point to put in the update today. This is how oil went from 100 to 145 to 35 in a few months of 2008 or from 110 to 78 to 90 today in the last few months. Demand around the world did not change in that percentage fashion.
Comments to a thoughtful Market Perspective reader by myself
I received a very thoughtful e mail from a reader this morning. The very good part of that, like being asked a thoughtful question in one of my college classes, is that it got me to thinking. And as I say, markets are driven by speculation, not the underlying economies. Social mood is what it is all about. Which brings me to Friday morning. Yesterday I stated it appeared the Dollar was finally coming off its highs and reflecting the divergent lower MACD.
IN the 1970s John Naisbitt published his first Megatrends book. His theory was that the size of newspapers does not change but the content of what is reported changes radically. He attempts to discern those changes and then report on what he deems to be the next big megatrend. Since the first book he has like Proctor and Gamble got into product diversification, Megatrends for Women, China, etc.
I believe socionomics takes his idea one step further. I scanned this morning's WSJ and here are a few comments I highlighted concerning the Euro, which of course has been routinely trashed until two days agao.
Page A 7 Irish Return to Bond Market
members may be able to become financially self reliant within the planned time frame
the true indication of Ireland's success
investors have rewarded the country with yields that have fallen sharply
five year bonds were sold at an average yield of 5.9%
now note this comment....It was a stunning result...It surpassed all market expectations
In other words, the social mood towards Irish debt changed overnight, trumpets please!
Page C1 Stocks Take a Leap of Faith
The sentiment swing on Thursday brought respite to weeks of fixation on the European debt crisis.
Indeed, as I remarked yesterday, I when I began writing a very early morning update the spx was down about 5 points thursday morning, then I got an e mail from a reader and bang, the SPX was up 14 in the blink of a socionomic moment. Like a giant school of fish in the aquarium, the school changed direction at that moment. As the quote above states, the mood changed.
Now granted there is an article about the ECU buying up debt on page A 7 as well, and the media will point to that as the change. Not so. We have been treated to endless reports, such as the German legislature backing Spain just last Friday, only to see the last drop in Spanish bond prices on Monday. After countless EU meetings of support the mood finally changed, period.
Oh one more thing, we know the sentiment is just now turning and the the waves are just starting up, INn a Wave A or Wave One there is considerable doubt which manifest in a Wave B or 2 pullback, this from page C 10 in the WSJ today
The ECB is talking the talk, sending stocks soaring and Spanish and Italian bond yields lower,
but will it walk the walk?
The existence of that doubt will cause many to hold their short euro positions and eventually be forced out which of course will vault the Euro market higher.
The media of course has been of no help in assisting you in making money. While we have focused on buying out of favor commodities, they focused on, yes, Facebook, now trading at post IPO lows. Mark Hulbert suggested FB was only worth $13, it is down from 38 to I think $24. Who would be surprised? On page A 2 this morning Zuckerberg himself states that the best advertising is a message from a friend. Well sentiment wise perhaps so but that won't drive FB earnings. At least Mark is honest in saying he makes money to build a better FB not the other way round. Sounds like he should have been a 501c3 not an IPO to me.
Well, stocks gold oil copper all up this morning, hoepfully by day's end valuations of our suggestions will have risen again.
Thanks for reading TMP, tell a friend. As Mark Z. says, teh best ad is a message from a friend!
PS The Targets given yesterday are for an expected top which probably will not happen until after Labor Day. We will have both ups and downs between now and then.