Enjoy this market recovery
by Peter Switzer
No one knows how long this market recovery will last but I say, let’s just enjoy it while we have it. Right now there are signs saying keep buying stocks while others say take the profit and wait.
This, of course, is high anxiety time for the trader but for the long-term investor, who has stuck solid with stocks this is pay-off time.
Overnight, we will hear about the European Central Bank’s latest long-term refinancing operation, which will pump billions of euro into EU banks and this has helped stocks. It comes as the Europeans look more serious about rescuing themselves.
Meanwhile, PIMCO founder Bill Gross says it’s time to play defensively but his CEO, Mohamad A. El-Erian, is even more indecisive saying stocks could go “way up or way down!”
Others say prepare for a sell-off – it won’t be disastrous but then it will be a good time to buy. And the doomsday merchants say, “Just you wait, all of this will come tumbling down”.
Of course they will eventually be right because all stock markets go up big time and then crash — that’s the history of share markets. The big question is, will we get two or three years before the next market slide?
Wall Street put in for the optimists with the Dow finishing over the psychologically-important 13,000-level. It ended at 13,005.12.
The answer is yes
But with all of this confusion, I like to look to solid indications such as whether the ECB’s monetary easing policy will lessen the EU recession and the answer has to be yes.
Also, is China easing monetary policy? Here the answer is also yes.
Then we go to the USA where the run of data points to optimism but some doubts linger.
On the plus side, consumer confidence hit a 12-month high at 70.8 in February compared to 61.5 in January, according to The Conference Board. However, durable goods fell four per cent in January and that was a surprise, while house prices fell for the fourth month in a row.
Personally, I don’t like oil prices up around US$108 a barrel as this will hurt the recovery but I do like the positive indicator out of Napa Valley!
CNBC pointed to this wacky indicator, which is seen as a good pointer for the health of the US economy.
In a nutshell, when restaurateurs and wine retailers feel good about their businesses, they spend up big in Napa Valley and this year sales were up 29 per cent.
So when retail and the big end of town feel better about the economy, they go long expensive wine, like artwork auctioned at Christies, which has been doing well lately. And I will drink to that!
Important information:This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.
Published on: Wednesday, February 29, 2012
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