Friday, October 30, 2009

The "Titian's of Talk" get it wrong?

We want the economy to recover so much we act like a moth drawn to the flame when talking heads, the “Titian's of Talk”, spew a message of false hope. The stock market was down on Wednesday and then rallied based on the GDP number on Thursday-- just to give it all back on Friday. I was amazed by the pundits who were saying that surely the Fed would have to start raising interest rates sooner rather than later based on the GDP number.
What bothers me about these “Titian's of Talk” is that they get people excited about the smallest move in the market or economy and try to pump the market to get people to buy. The most recent volatility in the equity markets tells me that I have been right for 35 years in watching to see what happens over a longer period of 24 hours before I make a decision to invest.

On Wednesday the NASDAQ broke down through it’s 50 day moving average, so the “Titian's of Talk” warned that we could see another 5% correction. Yet when the market was up almost 200 on Thursday the breach of the 50 day average and the recovery over the moving average caused hope to spring eternal. On Friday the market went down 250 points, the NASDAQ went through it’s 50 day moving average so what will the “Titian's of Talk” say tonight?

Gold, interest rates, and oil are down and the dollar is up, yet less than a week ago the “Titian's of Talk” were saying the place to be was out of the dollar and into those currencies that were commodity based like Canada and Australia because these are natural resources economies. They were saying that gold is the new currency and that people needed to get out of the dollar into the “New Currency”.

The “Titian's of Talk” are saying that the Fed needs to start raising interest rates sooner rather than later because of the movement of GDP. Next Friday we get another read on the unemployment in the United States with the release of the jobs or employment data. I expect that we will not see a downturn in unemployment until next year and perhaps not until the 4th quarter of 2010.

I believe if unemployment stays between the 8% and 10% level, the Fed will not start increasing interest rates on the short end of the yield curve no matter what the “Titian's of Talk” say. The Fed has told us they do not see a problem with inflation and they are more concerned about getting the economy growing and new jobs being created.

The “Titian's of Talk” are short-term thinkers and they are reactionary investors. They can say “I like this” or “I don’t like that” and people listen to them and in some cases invest the way they preach. For some people this approach might be OK, but I prefer to let things develop over time rather than make a decision on an economic number from the government that will be revised at least twice from here.

Dan Perkins

No comments: