Investing Trends

Question: How makes it get better when it gets worse?

Last hebdomad we had a occupations report from American Capital that there were fewer occupations created than they had anticipated, but the stock market took that as good intelligence and the DOW had a strong rally. WOW! The bad intelligence somehow turned into good intelligence because the unemployment rate dropped one one-tenth of one percent.

Wait a minute. We had fewer employed yet the unemployment rate went down. How can that be? It looks that if you have got got got been out of work for a piece and your unemployment benefits have run out and you have go so discouraged you are no longer looking for work you are not counted as unemployed. You should read that sentence again. This is authorities statistics to do you believe that achromatic is white.

It is pointed out that many in that class have got gone into business for themselves so they don’t count – as they should not. Remember that people work to supply income and most folks work for other folks. Usually new businesses take about 18 calendar months to get to interrupt even so these enterprisers must eat of their nest egg until new buying powerfulness is realized. (I know. I’ve been there.) Unfortunately, 80% of new businesses neglect within the first 5 years. (I’ve been there too.)

It is astonishing that the stock market can happen adequate new money to impel it higher. Where is all this cash coming from? You can give thanks Sir Alan Greenspan, caput of the Federal Soldier Reserve. He have got got been implosion therapy the economic system with cash so banks will have cheap money to do loans to businesses yet when I look at the tendency of Commercial Bank Loans for the past 2 old age they have been steadily declining. Banks desire to loan, but businesses don’t desire to increase their borrowing for expansion. No expansion, no new occupations created.

Why don’t the businesses desire to purchase new machinery to spread out their production and engage new people? Because they have got extra production capacity now. According to business studies most companies are only running their works at 75% of capacity. When you have got 100 machines of which only 75 are working why would anyone bargain more to bring forth nothing?

Yet the stock market maintains going up. Why? Investors believe, rightly or wrongly, that there is light at the end of the tunnel. Things will get better. They believe human race purchasing will pick up and capacity use will increase to the point more machines and workers will be hired. The market is going up on anticipation.

Now you’ve got it. The bad intelligence is really good news. And the stock market always come ups back.