When I first started in this business there was no internet, no blogs, no trading services, no real discount brokers and barely any information readily available that was timely and accurate unless you were in the know and paid a great deal of money for it.
Only the biggest headlines made the news and moved the markets; most of the market moving data was earnings or corporate news, not slight economic variations like we see today.
Back then, Bloomberg was about the only (and insanely expensive) thing going if you wanted to get information. This meant that much of the information getting to decision makers was scrubbed, factual and limited to only those that had the means.
Because of this, markets also traded much differently than what we see today and were not only less volatile, but also less bi-polar. Reactions were easier to gauge back then.
Part of the problem today is the deluge of information that’s shoved down our throats every second of every trading day. Making matters worse are a bunch of young, Red-Bull infused traders running billions of dollars, most of them without a clue about the most important bits of economic and company related data; focusing solely on momentum, algorithms or riding the coat-tails of the analysts of their firm.
This proliferation of short-sighted limited scope traders means that stocks tend to react in an abnormal and chaotic way to most would-be benign news items.
These reactions make it nearly impossible for the little guy (most of us) to interpret what the heck is really going on and stay on task of monitoring the health of the economy and the companies that we trade.
It can sometimes scare normal investors right out of a trade or coax them to buy junk companies because their stocks are quadrupling in value and being tweeted about more than Lindsey Lohan.
Take the ADP report today; it must have been interpreted about 40 ways by different blogs, news sites and talking heads. Each headline seemed to contradict the other!
The largest US payroll provider (ADP) said that 176,000 jobs were added compared to expectations for 175k. While that seems like a positive, some traders wanted more because they know that ADP tends to be on the optimistic side when compared with the BLS.
Others wanted a big miss so Bernanke and friends would reconsider tapering QE.
Some were making a stink that there were less jobs added this month than last or that it was the lowest reading in months….
The interpretations go on and on, but sometimes we need to stop bickering over miniscule data points and look at these numbers with a little less of a microscope and more of a wide-angle lens to see the big picture.
Does even a 20,000 variation really matter when the standard error (margin of error) is over 100,000 jobs or more?! I wish some of these bloggers would do a little homework before firing off opinions.
It’s very hard not to get caught up in the minutia, but sometimes we need to stop the insanity and look at the trends and the facts. The trend right now is that the economy is improving (albeit very slowly) and there has NOT been enough supporting evidence to sway the Fed away from tapering.
Instead of focusing on these miniscule differences in economic readings, let’s keep our eyes on the earnings prize because after 18 years of this I know that NOTHING matters more than corporate profits and growth; period. We could be fighting world war 3 and if companies are raking in the bucks, you can bet stocks are going higher!
The BLS is out tomorrow and like I said before, I expect it to be in-line with estimates to a little better (although sometimes I think these bean counters fudge the numbers to appease certain agendas, but I’ll save that for another day). I would expect the market modestly lower on that news.
There will be a rally if the BLS disappoints.
I guess I just want you all to know that I will do my best to be your guiding light and rock of stability in this crazy journey as traders and investors. Don’t give up on me and don’t let your frustrations get the best of you when things don’t go your way.