News Media have to Fill Space & Get Attention – Gloom & Doom Gets Attention
In the midst of an overload of information, it is important to step back, silence the rhetoric and gain a wider perspective of the economy. CymorFund has frequently discussed how the economy has cycles of activity. Each cycle starts anew at the lowest point of the previous cycle, slowly asserts itself, gains momentum and then peaks, with those that jumped on the bandwagon late in the day, being left in the dust as the cycle collapses. What causes the new cycle to quickly gain momentum:
- a great event
- a new technology
- an unforeseen matter
- a new crop of Wall Street genius’ who are newly graduated MBAs. These people have not experienced the end of the last cycle with all of its grief and pain. They are bright and fresh and new, with great new ideas and beliefs
The Last Cycle is Ending as the New Cycle is Beginning
We have now passed the low point of the cycle created by MBS’s (mortgage backed securities) and the new cycle is clearly starting. It seems to have started with many new creations for use on the World Wide Web and on mobile devices. Each day there is a new darling created by young and thoughtful geniuses. Consider that most new initially successful IPO’s are of this type including Facebook, MakeMyTrip, LinkedIn, Groupon, Twitter and so many others.
A new cycle does not rescue all those hurt by the previous collapse. Some will never recover. But the new generation that is participating in this new cycle will experience riches, and wealth until this cycle reaches its zenith and collapses, as every cycle collapses. For investors, and for those that have not been permanently crushed by the last cycle, it is time to avoid your mistakes of the past and conquer your fear.
The best time to invest is at the beginning of the cycle, not at the end when the the cycle reaches its dizzying height just prior to collapse.
Signs of Recovery
Oct 4, 2012 The U.S. unemployment rate dropped to a near four-year low of 7.8 percent in September, a potential boon to President Barack Obama’s re-election bid. In Canada, the economy added 52,100 jobs in September, more than five times the consensus figure analysts had expected.
Oct 12, 2012 Reuters – Euro zone’s strong factory output surprises in August. Eurozone manufacturing unexpectedly grows. Eurozone industrial production rose 0.6% on month in August vs. consensus of -0.4%, boosted by demand for food and French car manufacturing. Output of durable consumer goods increased 4% and non-durable goods 1.3%. However, overall output fell 2.9% on year. August industrial production figures are volatile due to the summer holidays, so analysts will be looking to the September data and onwards for a better idea of the economy.
Oct 12, 2012 Doug Short, Advisor Perspectives ECRI’s Leading Index Just Made A Big Anti-Recession Move.
Oct 13, 2012 The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) made a strong advance in the numbers released today. It is now at 127.7, up from last week’s 126.2 (revised from 126.3). The WLI growth indicator (WLIg) now marks its eighth week in expansion territory at 5.7, up from last week’s 4.6. WLIg has now posted fifteenth consecutive weeks of improvement and is at its highest level since May 27, 2011. The indicators ECRI shares with the public simply aren’t supporting the company’s repeated recession forecasts, which have, since mid-summer, escalated into assertions that we are already in a recession.
Oct 12, 2012 Daily Markets By NYFP : Euro Jumps As Equities Rise, Spanish Bond Yields Fall
Oct 12, 2012 RJ : Treasury has reported that the FY12 budget deficit was $1.089 trillion (about 7.0% of GDP), down from $1.297 trillion (8.7% of GDP) in FY11. Tax receipts rose 6.4% in FY12, reflecting increased economic activity (not higher tax rates). Spending fell 1.7%, reflecting lower defense spending (the end of the war in Iraq), lower Medicare spending, and lower interest payments.
Oct 12, 2012 A combination of factors – better U.S. economic reports, slowing growth in China, new concern over a Spanish bailout, and a stronger U.S. dollar – drove precious metals prices sharply lower for the second Friday in a row as gold and silver have now seen their most substantive retracement since concluding an impressive late-summer run last month. When precious metals jump in value, it reflects investors fears of coming inflation and economic stagnation. But look carefully at the price of precious metals – they are staying put below previous highs. The economy is recovering.
The Bottom Line & How to Interpret This
Being fearful that the world is sinking into a new depression, is a gross misreading of the economy. The world does not end a tough period by all economic indicators shooting upwards. Reality is not like a simplistic line on a graph or chart. Some indicators show badly, some show better. As matters progress and time passes, the good indicators gradually outweigh the bad indicators, and then all of a sudden, a tipping point is reached and the media realizes that things are better.
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Views expressed are opinions and not investment advice. Persons investing should retain a licensed professional to guide them and not rely on the opinions expressed herein. This report is neither a solicitation nor a recommendation to buy or sell securities. We are not a registered investment advisor nor a broker-dealer. The information contained herein is based on sources which we believe reliable but is not guaranteed as being accurate or a complete statement or summary of the available data.