Bill Bonner – Bill Bonner’s Diary (United States) –
BALTIMORE – We hit only one of our two big milestones yesterday. The winter solstice passed, as expected. For the next six months, the days will get longer, not shorter.
The stock market, though, did not hit the Dow 20,000 mark we were looking for.
But wait. What is the Dow? Is it a proxy for the stock market? Not at all. It is a price-weighted index; it magnifies the importance of just a few stocks, most prominently Goldman Sachs.
Looking at a breakdown of the 30 “industrial” stocks included in the index, we see that Goldman has a greater weight than JPMorgan, Coke, Intel, Pfizer, and GE… combined!
What kind of “news” is this? It’s not an indication of how well the market is doing, but how well companies like Goldman Sachs are doing.
Yes, dear reader, it’s all fake. Fake money. Fake interest rates. Fake news. The U.S. dollar is real. You can use it to buy things. But it is fake money based on fraud. It is more like counterfeit money than the real thing. Likewise, the news records real events. They happen. But they are often based on fraud, delusion, and misconception… not to mention myth and wishful thinking.
Life is always lived in the dark, as Lucretius might have said if he’d thought of it. But in the old days, at least the ground was free of banana peels and booby traps laid out by the feds and the press.
News is a modern invention. So is large-scale democratic government. The two go together.
The elite still rule, just as they always did. But now they are able to manipulate the masses largely by controlling the public narrative; that is… the news.
For hundreds of thousands of years, humans and proto-humans had only their eyes and ears to inform them. They looked, they listened… they watched. They drew their own conclusions.
It wasn’t until the 19th century that cheap newsprint made it possible to provide what we know as modern news.
But we still don’t know what to make of it. We’re not adapted to it. So we treat it as though it was the same quality as the information we get from our own eyes and ears.
“It’s in the paper; it must be true.” We take it as fact.
But what is it?
A gazillion atoms collide every day. The news only concerns a tiny fraction of them, such as the collision of the bullet coming out of an off-duty Turkish policeman’s pistol with the of Russian Ambassador Andrey Karlov.
But these few bits of information are chosen as news not because of the real facts – which aren’t much different from any one of thousands of other collisions – but because of the factish circumstances, the part of life that only exists because of the imagination.
Remember, there are real facts – things that happen no matter what we think – and there are facts we bring about ourselves… based on myths, ideas, institutions, prejudices, follies, and foolishness.
We create governments… and then the news tells us what they’re doing.
We invent sports… and then the news tells us how well our sports heroes do.
We build businesses… and then the business news lets us know what they are up to.
All of this happens in the public space, which didn’t even exist until recently… and has no existence even today beyond what our beliefs and gullibility permit.
If we stopped caring about football, for example, the Super Bowl would vanish.
If we denied the validity of elections, there would be no votes to tally.
If we gave up on investing, the Dow would disappear.
And if we refused to recognize states or their ability to meddle in each other’s affairs, the cop would have had no reason to kill the ambassador in the first place.
Do you see where we’re going with this, dear reader?
You do? Well, maybe you can give us a hint! We’re not sure.
But tomorrow, we’re going to tell you about the fakiest news of the 21st century. Stay tuned.
BY ALEXANDER GREEN, EDITOR, THE MOMENTUM ALERT
About the Author: Alex is the chief investment strategist over at The Oxford Club, and today we share his thoughts on how to become a successful investor.
As investment legend Peter Lynch famously said, “If you spend more than 13 minutes analyzing economic and market forecasts, you’ve wasted 10 minutes.”
History shows that investment success does not generally accrue to macroeconomists, geopolitical pundits, Fed watchers, and market timers. It accrues to people who understand and analyze businesses.
If you run a successful organization – or used to – think about it. Did you sit around in meetings analyzing global economic growth, currency trends, political rhetoric, or central bank policy?
If so, it must have been a short career.
Why do businesspeople not waste time yammering about stuff like that? Because there isn’t a thing they can do about them.
That’s why they focus instead on issues like generating sales, managing expenses, finding cheaper capital, raising productivity, hiring better-qualified employees, or emulating their most successful competitors.
These are exactly the sorts of things you should focus on as an investor: business fundamentals… and bottom-line profits.
But what do you hear each day in the financial media instead? Here’s a recent sampling, followed by a dose of reality:
“This is the weakest economic recovery since 1949.” (Interesting for historians, perhaps. But as an investor, it tells you nothing about what lies a.)
“Economic growth is now tracking at a 1% rate in 2016, the weakest start to a year since 2011.” (Another backward-looking statement that has no bearing on future stock market performance since equity investors are looking six to nine months out.)
“The dollar has also weakened, buckling under lackluster U.S. economic data.” (Yes, and it may well strengthen again next week. Notice that pundits always complain that a strong dollar hurts U.S. exporters and a weak dollar is bad for everyone else.)
I could offset these negative lines by commenting on recent net job creation, higher wages, robust consumer spending, cheap energy, low inflation, rock-bottom interest rates, and home sales hitting a post-recession high, but I won’t bother.
Because that, too, would be another form of tying your investment approach to the current economy.
And it doesn’t work.
It will come as a shock to some, but there is absolutely no short-term correlation between GDP growth and stock market performance.
Perversely, stocks often rally during the bad times and sell off during the good ones.
The last seven years are a perfect example. We’ve had an economy firing on only two cylinders and, simultaneously, a rip-roaring bull market.
Yet investors continue to obsess over each tidbit of government data, expecting it to provide some clue as to what the stock market will do next.
Whether we’re in a bull market, a bear market, or something in between, what drives a stock higher is a string of better-than-expected earnings.
In 1992, political strategist James Carville famously advised presidential candidate Bill Clinton to quit talking about wonky policy initiatives and focus instead on jobs and wages.
He boiled his advice down to three simple words: “The economy, stupid.”
In the world of politics, that may be true. But there’s a corollary for equity investors that’s almost as concise:
It’s not the economy, stupid. It’s earnings.
Editor’s Note: Alex recently discovered an even better way of figuring out which stocks are going to take off. It involves tapping into the shadowy world of “Dark Trades”… and he’s put together a special presentation to tell you how he’s using these secretive market moves to score big profits for his readers. Check it out here
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Next year is shaping up to be interesting. Here is a sampling of news events that could hit your newsfeed next year. Last year’s guide predicted both Trump and Brexit…
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Today, lots more comments from your fellow Diary readers about Bill’s thoughts on “fake news.” Catch up here: “ Fake News? It’s All Fake!”
Your Diary today about “news” is what I have believed most of my life. In my middle teens, I was swimming at a beach where there was a shark attack (thankfully, not fatal for the victim). After reading all of the “news” reports, I concluded that even if you wrote the whole truth of what happened out for them, the “news” would be distorted to serve their own purpose, frame of thinking, or agenda.
– John S.
I want the weather and sports because those are more difficult to fake. The rest is crap. Bloody lectures by a bunch of fools. Give me a break!
– Tim P.
Newsletter writers are always preaching doom and gloom. Now the U.S. has a president that can finally deliver for you. The Bush administration left the stock market and real estate (at least in Florida and California where I own) at less than half price. It has taken eight years under Obama for the stock market and real estate to recover back to where it was. Now it really is time to get assets out of the dollar economy. Because there is no doubt that Trump will cause another worldwide recession that is faster and worse than any before.
I will continue to follow your writing as you try to explain all the stupid things that our emotionally disturbed president will do. He will certainly prove to be the single most corrupt person ever involved in U.S. politics, and that is an exceptional accomplishment that only a lifelong scammer like him could do. I am looking forward to your most entertaining views in the near future.
– Hugh S.
Our local news, sans politics, is seemingly accurate and ostensibly without bias. Probably because there is little to be gained by slanting local events. National news via TV, papers, radio, or magazines is nearly always slanted toward the favorites of the media.
I admit to listening to Rush whenever it is convenient. That is always when I’m alone in the pickup with a good cigar and, on occasion, my dog. Is he slanted? Surely, and in the right direction which makes him tolerable. Also, I believe he is as honest as they come.
I always scan Drudge as I drink my first cup of tea or coffee for the day. I am, unabashedly, an unyielding, conservative independent who wouldn’t vote for a Democrat if I was buried in a pile of dung and he promised to pull me out. At 80 years young, I believe I can pretty much filter the b.s. out of the commentary. Most of it is common sense once you know the background of the situation being discussed. Admittedly, I shy away from foreign affairs because I’m not willing to devote the time necessary to understand them.
Drudge Report for survey of the national news, papers and TV for local news, and Rush for enjoyable, entertaining commentary.
– Greg S.
In Case You Missed It…
On his first day of presidency, Donald Trump will issue an executive order that will wake a sleeping giant… and send this tiny stock through the roof.
The Casey Report Editor E.B. Tucker just put together a video with all the details of this opportunity. Click here to watch it now.