The Market, Aspirin, Antacid and Laxatives.
Andy Kessler has an excellent piece in the Wall Street Journal today, talking about the yo-yo markets. In summary, here is the problem with the constant tinkering, and occasional slamfest, by governments in the economy. I have a headache, so I take some aspirin. I feel better so I keep taking it lest the pain returns, until my stomach gets irritated so I take some antacid. Phew, much better now, until… I become a candidate for an Activia commercial with that “I feel irregular” moan. Now I have to take a laxative. Ahhh, much better, …until I get another headache after taking too many laxatives so I take an aspirin and here we go again.
Container shipping up 12% over last year; unemployment trends worsen; GDP growth is up, no wait, down; industrial production up 1.3% in May, then fairly flat at 0.1% in June, April retail sales mostly up, then down in May and June; inflation, deflation; what, where, when, whom?
With so much tinkering across the globe as politicians scramble to save their jobs, and their approval ratings, there is no way to see what is really going on under the surface, too many drug interactions to see the patient’s real status. Just like when you hit an icy patch on the road, LET GO OF THE WHEEL. Tinkering only makes the situation worse and hides the underlying trends. Uncertainty rules so business gets very careful, while investors scramble left and right trying to decipher the codes.
As an investor, your best bet is to place your bets on and guard against volatility since in at the least the near-term, fundamental values will be overridden by macro economic factors. In the 32 market days since the peak in April, 22 days have been triple digit moves in the Dow. Politics dominate the markets, with regulations and taxes changing so fast that no long-term planning is possible. So called “value investing” becomes a gamble on whether or not that industry will be targeted, with three already having been assaulted: financials, energy and healthcare. Note that these are all rather fundamental areas for an economy.
