The Confusion of Listening to the Media
To illustrate the difficulty of the investor in choosing what investment path to choose, I thought I would mention just a few of the recent headlines. These headlines are chosen at random, with no particular purpose, except to show how reading current views, or listening to talking heads, results in a lot of disinformation. The best examples are the quotes I have listed below from August 3 & 4.
Compare these quotes to the market of August 10 & 11, which were days of high anxiety and doom and gloom.
Talking heads have a constant refrain about how we may be slipping into a deeper recession. The following headline doesn’t seem to support this.
“Aug 3/10 UK manufacturing output hits 15-month high British industry continued its resurgence in July as manufacturing output expanded at close to its recent 15-year high, according to the latest purchasing managers’ index.” An odd headline if you believe the economic world is heading for trouble.
Others have concern that the price of gold and precious metals may be in for a fall.
“Aug 3/10 Middle East gold sales rise on dip in price The fall in gold price from its May peak has seen gold sales up around 10% in Dubai and Abu Dhabi showing underlying support on price dips in this important market.“ The point is that the worldwide market for gold is not going away. The demand continues to outstrip production, and regardless of other factors, continually rising demand will over the long run, cause price escalation in gold.
“Tuesday, 03 Aug 2010 DUBAI (Reuters) – Retail gold demand volumes in Dubai and Abu Dhabi were up around 10 percent in July on the year as gold prices dipped and consumers had more disposable income to spend on jewellery than a year ago, retailers said on Monday.
Pundits always repeat that you should SELL in MAY and GO AWAY.
“Aug 3/10 ANNANDALE, Va. (MarketWatch) — The early bird gets the worm. That turns out to be true not only of robins in springtime. It also appears to be the case for those few traders who stay at work during August, thereby bucking the mass exodus of the rest of Wall Street for the Hamptons. In fact, August over the past century has been one of the better months of the calendar for the stock market, while September has been the worst. “ So brokers’ advice is often based on fallacies and disbeliefs.
A Double Dip Recession is Supposedly Inevitable
“Aug 3/10 We’re not going into a double dip. We’re going into a depression. I’m convinced of that,” claims renowned Market Forecaster Ian Gordon. Using his sharpest tools, Gordon has determined that the biggest market crash in our lifetime is coming sooner than most expect….….. Ian Gordon, president of Longwave Analytics say the market analysis model, known as the Longwave Principle, is a modified version of the Kondratieff cycle.” Essentially these cycles take many decades and we are entering the winter of this cycle which will be very bad and a time of economic cleansing of debt. As the reader can tell from my previous blogs, I do not share this belief.
The Simple Growth of Population and Middle Class Demand, will Create the Next Prosperity.
“Aug 4/10 European economic policy-makers must be pleased to have seen the last of the first half of 2010. The sovereign debt crisis that depressed markets not only in Europe but also around the world has since eased, and investor confidence is returning to equity markets on the Continent. The key event that appears to have triggered the improvement in investor sentiment was the publication of the results of the stress tests of 91 European banks. These results indicated that only seven banks failed, with a surprisingly small aggregate capital shortfall of only 3.5 billion euros. The EU stress test exercise is an important contribution to bolstering confidence in the European banking system and strengthening the resilience and robustness of the global financial system.” Interesting. Sounds like the world is stabilizing doesn’t it?
And then we have those famous persons who believe very strongly in gold
Aug 4/10 Gold heading for a parabolic rise – John Embry “If gold is not between $1,500 and $2,000 in the next 18 months, I’m dead wrong We had yet another example of that – we’ve seen this through the entire ten year bull market. You’ve had these terrible sharp, wrenching down moves that have been driven by the paper gold market, and yet without fail they always rally back to new highs. And I fully expect that by September this will just be a bad memory and we’ll be back at new highs.” I do agree that gold has room to rise, and I also agree that it is a good place to be. However, I do not believe that gold’s rise foretells the economic disaster of the loss of value of paper currencies.
And one Final Quote
“Aug 4/10 Growth in Europe’s services and manufacturing industries accelerated in July, suggesting the recovery will maintain its momentum. A composite index based on a survey of euro-area purchasing managers in both industries rose to 56.7 from 56 in June, London-based Markit Economics said today. The July reading matched Markit’s earlier estimate. A reading above 50 indicates expansion. Once again, it really depends on who you read as to what you may believe in. Conclusion
The foregoing, which is in no particular order, is taken from only two days of headlines and was chosen in the order in which I read them. One can list many more that are equally contradictory. What sells newspapers, letter writers, TV shows, on-line comments to readers and so on, are sensational and dramatic comments.
The point being made here, is that one is able to be a value investor and recognize true and lasting value. One can ignore all of these headlines and be very profitable.
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