INSIGHTS
DEC
2
WEEK AHEAD...
We have been away two weeks and not a thing has changed on the economic landscape. We are still waiting for the inevitable tapering and our government is spending millions on something that three smart kids from Harvard could put together in their sleep, a functioning website. The markets don’t appear ready for another push higher or that highly anticipated selloff. We are in a flat trading range and we believe that will continue for the foreseeable future.
The issue with Healthcare.gov is embarrassing to say the least. From some estimates the government spent over 620 million dollars developing this website. That is almost two dollars for every man, woman and child in this country and that is before anyone gets to log in. It just seems like a colossal waste of taxpayer money and could have been done cheaper and more effectively some other way.
But hey, those are our elected officials in Washington.
Back to the economy and what we see as the year end set up. While the Holiday season seems to be getting off to a better start than expected and we even heard some analysts predicting that this could shape up to be a record setting season. We saw people out and about on Saturday and they had bags in their hands. A good sign. The sales seem to be average. No one is giving away the shop…yet. Another good sign for retailers.
While Robert Shiller’s comments about a market bubble may have a profound impact on the market, we aren’t in that camp just yet. To see a frothy, bubbly market you need to have price valuations above where they are now. A PE multiple of above 23 would start to cause some concern. Earnings are not rising that fast and having stocks trade to that level would cause us to put in a sell signal.
We do feel that we won’t see that anytime soon because we think the market will trade in a narrow band again, sideways. Risks will increase only when we get to the previous point or when we see geo political events that could cause a major correction.
This week is chock full of important, yet boring numbers. We will have PMI Manufacturing Index on Monday along with different gauges of construction spending. Car sales, ADP Employment situation and the Employment situation on Friday all will be watched by the Fed and traders alike. Surely, the most important gauge of economic health will be results from Cyber Monday. Retailors have said that sales were up but foot traffic was done so we conclude that people are spending more when they spend and we will see the results of that this Monday. We expect to see records broken across the board.
No matter what the bears say, we are recovering and things are improving across many metrics and unemployment seems to move little, we think there is something else going on there and no one seems to want to find out what it is.
One thing we do believe that is alive and well and continues to grow to the dismay of every elected official is the underground economy. We think that the millions of unemployed have worked their way into this growing segment and have done fairly well keeping their heads above water.
The issue with Healthcare.gov is embarrassing to say the least. From some estimates the government spent over 620 million dollars developing this website. That is almost two dollars for every man, woman and child in this country and that is before anyone gets to log in. It just seems like a colossal waste of taxpayer money and could have been done cheaper and more effectively some other way.
But hey, those are our elected officials in Washington.
Back to the economy and what we see as the year end set up. While the Holiday season seems to be getting off to a better start than expected and we even heard some analysts predicting that this could shape up to be a record setting season. We saw people out and about on Saturday and they had bags in their hands. A good sign. The sales seem to be average. No one is giving away the shop…yet. Another good sign for retailers.
While Robert Shiller’s comments about a market bubble may have a profound impact on the market, we aren’t in that camp just yet. To see a frothy, bubbly market you need to have price valuations above where they are now. A PE multiple of above 23 would start to cause some concern. Earnings are not rising that fast and having stocks trade to that level would cause us to put in a sell signal.
We do feel that we won’t see that anytime soon because we think the market will trade in a narrow band again, sideways. Risks will increase only when we get to the previous point or when we see geo political events that could cause a major correction.
This week is chock full of important, yet boring numbers. We will have PMI Manufacturing Index on Monday along with different gauges of construction spending. Car sales, ADP Employment situation and the Employment situation on Friday all will be watched by the Fed and traders alike. Surely, the most important gauge of economic health will be results from Cyber Monday. Retailors have said that sales were up but foot traffic was done so we conclude that people are spending more when they spend and we will see the results of that this Monday. We expect to see records broken across the board.
No matter what the bears say, we are recovering and things are improving across many metrics and unemployment seems to move little, we think there is something else going on there and no one seems to want to find out what it is.
One thing we do believe that is alive and well and continues to grow to the dismay of every elected official is the underground economy. We think that the millions of unemployed have worked their way into this growing segment and have done fairly well keeping their heads above water.