Its a rainy day here in the NorthEast, so for those of you who remain tethered to your computers over the weekend awaiting a change in weather, here are a few things worth exploring:
• Oil has obviously been roiling the markets, and its worth peering deeper into its relationship with the economy. Here’s a wrap of recent posts, comments, charts and resources on the slippery black stuff. Most valuable post: The Oil Research Resources.
• I’ve gotten requests for some of my favorite market related blogs and resources. Instead of writing them all up. I put together a "meta page" of my favorite sources of other sources: The Meta-meta page. There are few guarantees on Wall Street, but here’s one: I personally guarantee you will find something in this collection that will become utterly invaluable to you. And, you will be dumbfounded that all this is available for absolutely free.
• Please bear with a little shameless self-promotion: The Apprenticed Investor series has developed into a fascinating area of discussion. The idea is to go beyond mere stock selection, to get at the investor behaviors that cost you money or missed opportunities. This probe into a variety of overlooked subject matters in investing has definitely struck a nerve. The feedback has been unlike anything else I’ve ever done on the site. Please check it out.
• A fascinating study was out this week, revealing that most Americans have a "poor grasp of economics. Go figure: Can’t invest, don’t know understand economics, and nisunderstands the concept of risk management. Is it much of a surprise that plans to privitize social security — which looked like a slam dunk post-election — are in trouble?
• Lastly, a little goofy fun: A friend directed me to "Vintage Stock Market Predictor Computer" up for sale on eBay. Its the very same one mentioned in Alan Abelson’s Up And Down Wall Street column in Barron’s this weekend. Good luck finding one for yourself (I ain’t selling mine).
"Economists set themselves too easy, too useless a task if in tempestuous seasons they can only tell us that when the storm is long past the ocean is flat again."
– John Maynard Keynes, Tract on Monetary Reform
- Economists and fundamental analysts often miss cycle turns.
- There’s always another recession — and expansion — coming (eventually).
- Learn to separate hand-wringing permabears from credible commentators.
If you have been listening to the financial press recently, you might be shocked (shocked!) to learn that inflation has been increasing and the economy is slowing.
You don’t say?
Of course, readers aren’t just now discovering that this economy has been suffering from inflationary pressures for more than two years, as a chart of the CRB shows.
It’s the same with GDP. Follow the numbers: The third-quarter 2003 number was 7.8% (originally reported as almost 9%), the next quarter’s was 4.2% (originally 6%+) and 2004′s quarterly data came in at 4.5%, 3.3%, 4.0% and 3.8%.
This week, we learned the first quarter of 2005′s number of 3.1% was way below consensus expectations. While some will tell you that 3%+ GDP growth is pretty decent, it’s the trend of waning momentum that is the issue. An early mentor of mine used to admonish traders to not look at the photo, but to watch the full movie instead.
So much for the idea of kinda-sorta-eventually-efficient markets hypothesis.
Slowing GDP and rising inflation have been discussed on this site for over a year now. The investing issue with macroeconomic concerns is not the actual data, but how — and when — that data affects psychology. It’s a question of timing. The commentators who are first now discovering weak GDP and inflationary pressures are not much help to you once the ocean is flat again.