It's the economy, stupid

If today movement is any evidence, and with Q1 now almost behind us, I think we’re about to turn the page on the markets. I believe Mr Market is beginning to re-price in the notion that the economy is actually doing quite well, and rate hikes be damned - if you’re not investing in an market with economic fundamentals on the uptick, then in what situation are you going to invest?

Adding a little support to the argument, I came across this news blurb:

Investors have been spooked by Wednesday’s release of minutes of the last Federal Reserve meeting that suggested the central bank may raise interest rates in June. But Jim Paulsen, chief investment strategist for Wells Capital Management, thinks the market should welcome talk of a rate increase because it shows the economy is strengthening. “The economy is good enough that even the Fed thinks it might be able to raise rates,” he said. “Job creation is there; unemployment is low.”

Here’s to a great Q2 to all of you, and many happy returns for rest of the year.



I don’t really know if the economy is turning a corner or not. I’m not good enough to generate a reliable prediction.

Here is what I know:

Over the next 5 years, I will receive 20 earnings reports for each of the companies I own. There will be 40 FMOC (Fed) meetings, followed by Fed statements and market reactions. And the slipstream of financial media (which has no fiduciary responsibility to their readers) will opine, advise, recommend, and tell us all what the smart money is doing at that very instant every minute of every day.

Over the next 5 years, investors will vacillate between optimistic and pessimistic. Valuations will be possessed by this ever-shifting zeitgeist. We may even see one of those crazy bipolar episodes of mania and depression, but probably not.

Here is what I care about:

  1. Is my thesis intact or busted? Hold, buy more, or sell accordingly.
  2. Are there new opportunities? Develop a thesis and buy accordingly.
  3. Are broad valuations going crazy? Lighten positions, or add positions, and write options accordingly.

To piggyback on what Kevin said, yesterday Applied Materials raised guidance citing a wave of new orders coming in, especially from China. AMAT makes machines for companies which make semiconductor chips - this bodes well for the tech sector (like SWKS). Demand may be picking up again.

Why Applied Materials Stock Surged Today

The semiconductor equipment vendor saw a massive increase in orders, allowing its guidance to far exceed expectations.…




Overall the market has gone nowhere for the last year or so and we have gone through a steep correction.

Energy costs are down. Once the overextended energy firms are washed out of the system the economy will adjust. Over the next few years the US will not need to import as much oil as in the recent past. I still think lower energy prices are a positive for the economy.

The market has known for a while now that the Fed is going to raise rates again, no surprise there. I think chances are a few rate hikes are priced in.

Overall more people are employed. May not yet be where we need to get but at least we are headed in the right direction. I think higher employment rates should help future earnings.

Going forward I too am bullish.

Hope we are correct.

Kindest Regards,


Despite perceptions to the contrary slowly rising interest rates are not bad for the economy. Or more precisely, rising rare are coincident with a good economy because their is more demand for money to fuel corporate expansion.
What is really bad for equity markets is when short term rates are higher than long term rates (inverted yield curve)

Hw much this has been altered in recent years by continued Federal Reserve manipulation is an unknown.