Negative News Negates Market Growth

Is it me or lately has all the news coming out of the Fourth Estate been negative when it comes to the markets?  Each day we are seemingly bombarded with negative news.  It’s almost as if reporters today have a death wish in terms of market direction.  Case-in-point:

-          Margin Debt Reaches an All Time High

-          Scary Chart compares today to 1929

-          Signs of a Market Top

-          Stop Trading Now Before 2014 turns into 1929

I’m partially amused with the comparisons to 1929.  Aren’t these folks aware that we are not 1929 nor do we have the same economy as 1929 or even the same market?  In 1929 there was no global economy; all goods and services purchased were domestic.  To do otherwise was considered “un-American”.  We didn’t trade global markets in 1929; we only traded domestic ones and had no access to vital information concerning equities.  There was no quarterly earnings, no quarterly reports, no prospectus, and no annual earnings as by law (at that time) companies weren’t obligated to do so or provide.  In 1929 the people who ran the Federal Reserve believed strictly in hands off policy known as laissez faire.  Meaning the free markets could best determine how to work things out.  This led to a disaster in 1929 as the Federal Reserve did little if next to nothing to help the markets or the economy. 

Does this mean that I don’t believe the markets wouldn’t or couldn’t fall?  Of course not.  Whatever goes up will go down and vice versa.  The point is a market falloff will occur when it occurs and for a good reason not because of some chart.  In 2008 the markets had a good reason to fall as the banks and many commercial entities were so tied up in real estate that it was a bust waiting to happen.  There is no real estate boom now; we aren’t even up to parity with 2007 just before the market fell off.  Banks were lending to people with no SSN and who had no idea what they were signing.  All they were told was “real estate never goes down, never.”

In terms of margin debt, why wouldn’t it be at an all-time high if the markets are continuously reaching all time highs?  Does anyone think that traders or investors are going to buy stocks with all cash and no purchasing power?  Tell that to investors who bought Apple at $500.00 a share.  These comments and headlines are ridiculous because no one is equating today’s markets versus 80 years ago.

Instead of worrying about a chart from 1929, why aren’t these people talking about Capex (capital expenditures) spending?  I would venture to say that if you asked anyone of them they would reply “well that only represents 30% of all spending in the United States.”  Only 30%?  That’s “only” about 3 -4 trillion dollars.  That doesn’t sound small to me.  If they want to talk about why the markets will fall, why don’t they discuss lack of purchasing power with consumers, excessively high unemployment and the lack of jobs in this economy?   Why not discuss the income inequality that has been going on in the United States for the past 30 years?  Trickle down doesn’t trickle down; it pretty much stays where it’s at.

Nick Mastrandrea is the author of Market Tea Leaves. Market Tea Leaves is a daily newsletter dedicated to your trading success.  We discuss and teach market correlation. Market Tea Leaves is published daily, pre-market in the United States and can be viewed at www.markettealeaves.com  Interested in Market Correlation?  Want to learn more?  Signup and receive Market Tea Leaves each day prior to market open.  As a subscriber, you’ll also receive our daily Market Bias video that is only available to subscribers.