Saturday, December 10, 2016

MAD Economic Review - 12/10/16

"We must always learn from history to guide our future" - The MAD Consultant

I've been lucky to have recently traveled down to Georgia. I visited beautiful Savannah, and Atlanta.   I was able to spend quality time with really great friends while I was there too. One of the pleasures of travel.  


Now some people travel to lay on a beach, get drunk in bars, or visit boutique shops. That's fine if it's your thing.  Not here at MAD Consulting.  My wife has the pleasure of joining me on multiple history tours, historic sight visits, and museums. Fortunately she enjoys it too. I just make sure to visit all the animal farms a long the way so she gets what she wants.  I learned a lot on that trip and not just from tour providers, and informational placards.  Learning can also come from friends, and the people you meet.  There is a lot of knowledge out there. We must try to take it all in. 



I mention this because so many of us pay zero attention to history.  The textbooks in school don't give you all the information, teachers don't add much zest, and most people think it's in the past so what does it matter - not true.  


The past is a great source of information for the way our markets and economy function today.  We can gain valuable insights from prior regulations, financial panics, and market behavior that can help guide our decisions for tomorrow.   There is a reason why people do a lot of research when evaluating what investments to make  Reading the latest news article is just one snippet of information, and barely any people actually do real research outside of the pros. It's why I spend tons of time reading over annual reports, SEC disclosures, and reviewing charts everyday. Because this information is VALUABLE. 


So my advice is don't just listen to what someone on the street says.  Even if it's your favorite Aunt/Uncle, wine drinking partner, or talking head on TV.  If research is not your thing then please find the best qualified professional around. Sit down with them and have a real discussion. Ask questions. Then ask the same questions again.  There is no such thing as a bad question, or to much information.  


Did I mention I have plenty of information, and love having discussions here at MAD Consulting?  I hate sounding like a sales person, but this is what I do because I LOVE IT. Don't let your financial future stay on the sidelines while you pay more attention to Facebook memes, Vines, and GIF's. I truly care about your success and helping you reach  every goal you have in life. Nothing upsets me more than when people leave their financial lives abandoned on the roadside. Just ask my wife. She'll tell you how deeply it affects me when I see someone struggling financially, or not reaching their financial potential. 


Economic News


Last week the second estimate for GDP came in and it was revised from 2.9 to 3.2%. That's good news, but it's backward looking. Markets already know what happened that quarter from earnings reports and other announcements.  


The bigger data set in my opinion was last weeks Consumer Confidence Survey courtesy of the Conference Board(almost as boring of a name as MAD Consulting 😉) coming in at 107.1 from a prior 100.8.  Then this week we received University of Michigan's(go Wolverines) Consumer Sentiment Index which also showed a big climb from 93.8 to 98.  That puts U of M's index on a path to finally break the 2004 high during the Bush Administration, and prior to the housing market collapse.  Within the survey results participants actually cited Donald Trump's win as a reason for renewed confidence in the economy.  While it doesn't explicitly state it, but by mere simple logic that means people would have feared the economy would get worse under Hilary Clinton.  


Think back to what you've heard all these years. The news constantly reported consumer spending is an issue. Rightly so. If you have horrible job prospects, are fearing the loss of your own job, or your taxes keep heading higher why would you go out and spend?  It's always about confidence. Even our own currency depends on it. 


Market News


Speaking of our currency, and it's about time for plenty of super sized charts, the US Dollar Index continues it's steady climb up as it's held up very well overall above the psychologically important 100 level. 




I recently wrote about the perception that it's considered "bad" for US equity markets when the dollar is rising. While currency has a big impact on different asset class prices, it seems that right now a strong dollar means a good stock market.  Reason being is judging by the currency moves of other big nations money is coming out their currencies and into the USD.  Take no look further than the Euro, Yen, and Pound which are heavyweights.  All 3 have lagged the Dollar(top line) badly since July 2014.


Visit StockCharts.com to see more great charts.


Which  leads us to our beloved stock market which saw all 4 major indexes hit new highs this week. The stock market is the creator of more wealth than both Democrats and Republicans combined.  ***Caution Politics Ahead***


Visit StockCharts.com to see more great charts.




To just about every one's dismay, especially if you voted Democrat this election, the markets keep hitting new all time highs as small caps have surged 20%, and the S&P 500 is up over 8% since the election . Why the dismay if you voted Democrat? Because you likely believed the news, and what every pundit told you, that Trump in office would be bad for the markets & economy. Don't worry even people that voted for Trump thought the markets would crash based on what they heard. 

Here's the thing. What other people want you to believe, or what you believe yourself, has no bearing on what the market will actually do. You can't send your "beliefs" the markets way and assume it will bend or break because you think it will.  It doesn't work like that. The market is the collective agreement of individuals around the globe on what is "correct".  

The market has been one of my greatest teachers in life.  It doesn't judge based on race, creed, political grouping, gender, or age.  It knows no bias. It will drag you in, grind you through every gear, and spit you back out in a thousand pieces.  You have to build a lot of humility and toughness to get back up from your first few lessons. That's why I love it.  The market has dumbfounded more people than the Rubix Cube, Jimmy Hoffa's resting place, and roughed up more people than the CPD in 1968.  However if you pay attention to it long enough, study it, analyze it,  and lose/make money in it you'll eventually learn how to live with it, and make it your greatest ally.  

This will be my last Economic Review until January 2017. I'll still post a few updates to the blog including some extremely exciting updates. There are some hints lying around the website if you have a keen eye. Also there are still spots available from my Thanksgiving promotion. You can find details here and here.

I'm going to take some time the next few weekends to enjoy all the season has to offer including Christmas and New Years.  I want to wish everyone a Merry Christmas. For those that celebrate a different holiday I want to wish you the best as well.  This joyous time of year is one of many reasons that make this country great. We can celebrate our religious beliefs without fear of persecution. Sadly not everyone is afforded that right around the world.  No matter what tradition you celebrate I wish you the biggest laughs, and happiest memories.

 Best Wishes - The MAD Consultant

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