Fair enough…if you are a first time reader of my posts you will probably have a hard time following my thought process…
I don’t post ideas like this stock is a buy or sell, and if I do, I make sure to elaborate on why that is and make substantiated arguments….
Now to your point, if you know the CEO’s "philosophy", then you would know that he believes one of the characteristics of his firm’s performance, is how well the economy is doing. Therefore, focusing attention to the economy is one way to gauge how well, or not, the company will perform.
Moreover, if you follow the weekly market commentaries and public notes to clients, by analysts and other company executives, as well as the TV appearances of chartists and others at this firm, then you would be able to understand that my posts are linked to their findings…it is my response to their prognostications and forecasts…after all, we all expect a financial firm to follow its own forecasts, so if those analyses are panning out as they have expected, then it is the easiest way to determine whether the company will have superb performance....if they are not, then we should expect it to do poorly...
The bears and even some bulls say that all this optimism of the markets is an illusion, it is a Fed induced rally and not a fundamental expansion….As we all know this rally is not due to current extraordinary revenue growth, superb margin growth or low price to earnings multiples but to me, it all boils down to the realization by investors that American companies are dominating the world and can easily expand market share if only they put their cash to work more aggressively. We need to see an increasing acceleration in money supply that will trickle down to the real economy.
With that said, I still like the hesitation by these institutions, it is proof that nowadays firms are more rational; many are still reeling financially from the financial crisis a few years back.
The fact that no mid/large cap companies are trading like a 50 cent-on-the-dollar investment, despite the stimulus of quantitative easing, is a very strong sign. Even as earnings and margins might still be on the normal side, the current trends capture the potential of a rising and explosive US investment-based mindset.
Based on the history of global investors to US based companies, we can be fairly certain that a strong rally will come soon enough. I don’t know if the spike in performance will come by month-end or year-end but I believe that we have in no way reached the top. A potential strengthening in the US will be the driving force and lead to a rise of all boats…. global markets will surely follow…
the most likely trend to follow is the strength of the economy….which will anchor a further rise in the stock market….
I guess this is the million dollar question nowadays…..Here is why?
Some like to use the rumors of whether “the Fed will or will not taper” to prove that markets move according to this idea. I too believe that this “whisper” did in fact play its role in price action. But only initially, to me, markets are really good at quickly switching to what should be the most currently relevant/appropriate focus and invest accordingly...
Here is a story that I think might better illustrate my point:
A minister told his congregation, "Next week I plan to preach about the sin of lying. To help you understand my sermon, I want you all to read Mark 17."
The following Sunday, as he prepared to deliver his sermon, the minister asked for a show of hands. He wanted to know how many had read Mark 17. The majority of the hands went up. The minister smiled and said, "Mark has only 16 chapters. I will now proceed with my sermon on the sin of lying."
My point here is not to question the majority of the audience raising their hands when not having “read” the chapter of the book….my point here is that the audience might have been tricked the first time, by the minister’s witty attempt to push his point across, but it’s necessarily doubtful that they will be tricked a second time.
And that’s exactly what occurred last Friday with the strong employment number. The markets did not sell off when asked if they had “read” the chapter. In fact, it had the exact opposite reaction: no one raised their hands! The “minister” thus had a very hard time proceeding with his “sermon” and helping them better understanding it!
Moreover, there are also those who claim that there is a rotation from bonds to equities that’s why markets soared on Friday….they are simply confusing the “affect” vs. the “effect”….as I have been recently writing, to me, stock buying, selling or rotating is affected by the strongest player effect…the markets no longer care if the boy cried “taper”!