Through most of the last decade, I answered an interminable number of investor questions about whether the weak dollar would destroy the very foundation of our world. (I exaggerate, if only slightly). Now that the dollar is showing some ballast, we get this: P&G to Apple Hurt by Strong Dollar Keep S&P 500 Profits in Check.
Look, I don’t care which way you fall but someone needs to cry foul when we perceive both a strong and weak dollar to be bad. In reality, we’ve had plenty of bull and bear markets in both strong and weak dollar environments, and in my view dollar direction doesn’t generally tell you much about what stocks are likely to do.
Currencies matter. A lot. But don’t get too far lost in this quagmire when it comes to judging the stock market.
The next time an investing guru presents you with ironclad statistical results, remember this article:
Unreliable neuroscience? Why power matters – Suzi Gage
In a paper published today in Nature Reviews Neuroscience we reviewed the power of studies in the neuroscience literature, and found that, on average, it is very low – around 20%. Low power undermines the reliability of neuroscience research in several important ways.
Just about everywhere I go, I meet investors who tell me so-called core inflation is a dumb metric and food inflation is very high. Check out this recent graphic from Bloomberg Businessweek by Dorothy Gambrell.
“In 1984, the average U.S. household spent 16.8 percent of its annual post-tax income on food. By 2011, Americans spent only 11.2 percent. The U.S. devotes less of its income to food than any other country—half as much as households in France and one-fourth of those in India.”
In the words of Stan Lee, ‘nuff said.
For some years now this blog has argued the inclination to hold the pan European unity project together would be stronger than most believed. Despite ad infinitum and ad nauseum calls for increased nationalization, the Eurozone refuses to buckle just yet. If it will one day die, and it certainly could, it’ll die hard.
Now that it’s Q1 2013, this ought to be stunning to many pundits. Just as global equity markets’ resilience and lack of European meltdown has astounded many investors, too.
Graphic from the Wall Street Journal.
Markets adapt, and long-term profits approach zero for high-speed trading. The winners are market participants, who benefit from higher liquidity and smaller bid/ask spreads. The part most folks miss about the flash crash is the market self-corrected as fast as it sank.
Regulator, Go Slow on Reining in High-Speed Trading: Algorithm-driven trading appears to be self-correcting. That’s good—the hyper-fast world needs it.
I don’t always agree with Jim Cramer, but here is some good sense that’s been espoused on this page for some time now:
You know what didn’t work in 2012? Risk on, risk off. As hard as I tried to stamp out this ridiculous bit of hedge-fund-ese, I was not able to. There are too many commentators out there, and too many traders who want to succumb to this kind of non-rigorous, intellectually lazy thinking, and it’s impossible to shut them all down. But let 2012 be a lesson to you: It was revealed that you would have underperformed these people if you’d followed them. Notice I say “underperformed,” because one thing is for certain — none of these blowhards will let you see their returns after what I bet was a fiasco year for what I can only call an “alleged” strategy.
Let this be the death of risk on, risk off – Jim Cramer
Check out Guy Sorman’s latest article in City Journal: A Brief History of American Prosperity.
It will both soothe those fearing the demise of the US economy and inform of the dynamic American economic past.