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Price Is All That Matters, the Rest Is Noise: Hoenig


The producer price index rose 0.7% for February but only 0.2% ex food and energy. Meanwhile weekly jobless claims dropped 10,000 to 332,000, continuing a slow improvement and moving the four-week moving average to the lowest level since 2008. Of course all this could be trumped by the hotly anticipated consumer price index report tomorrow morning.

But the point of investing is to make money. In the attached video Jonathan Hoenig of CapitalistPig.com offers a piece of advice for folks searching for a single data point to use when judging the health of the market.

“Price!” Hoenig offers. “In my world the three rules for investment speculation are price, price and price.”

Note that he didn’t use words like “nominal” or “quantitative easing.” He didn’t even bother to name check Bernanke. The point at which the rubber hits the road is the value of your portfolio. Everything else is just an input in a giant mental spreadsheet designed to help predict price.

That doesn’t mean to lunge in and out of stocks based on a day worth of action. “Stocks move like the seasons,” Hoenig says. A bad day for stocks (ask your dad about when those used to happen) doesn’t mean the trend has reversed any more than a cold day in March means there will be no spring.

When Blue Chips like Johnson & Johnson (JNJ) are moving higher along with transportation stocks and small caps and just about everything except Apple (AAPL), it’s hard to say the stock market is flashing a red light."

As for a bubble, Hoenig is dismissive. “We’re not seeing that public participation, that type of rampant bullishness that accompanied 1999 or 2000 or even 2007.” Unless or until we do, the best way for most investors to assess their economic future is pretty simple: Punch up your stock tickers and look at the prices.