Market was up today. It looked like it needed a technical rally. The market these days is not trading off news, but just technical points. The consumer income figures were interesting today. Spending is up slightly. However, if I look at last weeks GDP report, I know that a lot of this income is from government transfer payments, not actual hourly wage rises or increased employment. The ISI number at 10PM EST showed manufacturing activity up. Again, I look back at the GDP number from last week and remember that inventories are being rebuilt. So, this is a natural outcome.
I am bullish, and don’t see a disaster (barring a terror attack or very odd financial maelstom). The market needed a breather and the early rally this year was on light volume. It technically hit a point, filled an old gap and we can see if it progresses higher.
While I am bullish, I am not overly so. I see the economy limping along, not roaring back in a V shaped recovery. Other economists I have read, like Roubini, are very very bearish. A clock is right twice a day. After reading and listening to Roubini, I think his trading strategy is very expensive to implement. It is a swing for the fences strategy that will make you a lot of money when 2.5 to 3 standard deviation events happen; but the rest of the time you will slowly bleed cash.
GDP at 5.7% is an outlier. I suspect we will be very slow growing, in the 0.5-2% range. This is a really good time to buy stocks for the long haul, and I suggest you use Eugene Fama’s Efficient Market Hypothesis to undertake any investing actions. His hypothesis essentially states that an individual cannot beat the market. So you should be invested in a broad basket of stocks. You don’t need a financial advisor to pick them. Just invest in a no load mutual fund that replicates the broader index. You will save your portfolio a lot of money. If the market behaves like it has over the past 60 years, you will make 12% return on your money. Investing for the long haul isn’t rocket science.
If you invest your money this way, put the same amount away each month. If you have a windfall, put a little more in. Never look at your statement. When you are 59, start to diversify. Move some of the stock money into bonds. Once you retire, you should re-allocate your position based on your appetite for risk, and how long you expect to live. Like I said, this isn’t rocket science.
If you want to take a flyer on something, fine. Follow the first commandment of investing, “Risk not thy whole wad”.
Tomorrow is the primary in Illinois. I am pulling a Republican ballot and voting for Adam Andrezjewski, and Mark Kirk. Adam is the only outsider with experience enough to run the government. Kirk has been a fantastic friend to the Chicago Mercantile Exchange.
If I was pulling a Democratic ballot I’d vote for Pat Quinn because Hynes has run on a tax increase targeting only people that make 250K a year or more. Just saying that leads me to believe he doesn’t understand basic economics. In the Illinois Senate race I’d vote for Hoffman. He is the only true reformer running on the Democratic ticket.