Economic, Political and Market News Commentary for 9/30/2014
After listening to the News religiously at work (nearly six hours a day) I think i’m finally ready to sit down and string some thoughts together.
The fed recently held a press conference where they announced that they anticipated to see interest rates at 3% three years from now. I dont really see how this is such big news, everybody knows the interest rates have to be raised however some labor statistics came out showing above predicted U.S GDP growth and promising unemployment statistics. This prompted The Street to anticipated a Fed rate increase sooner rather than later.
What’s interesting to me is not the news of the press conference itself but rather investors and analysts reaction to it. In reports and interviews it seems as though analysts believe market valuations are normal. There is a perception, I would assume, held by some that there is a “wall of money” keeping the market afloat in the form of a 0% interest rate. I quickly Googled and found a market valuation method used by Buffet of comparing total market capitalization to gross national product. After some light reading market valuations are around 122.% of fundamental value currently where as they were about 40% overvalued in 2001.
Maybe i’m just oversensitive but I don't see any reason to put money into equities. I think that a much better strategy would be to invest in what is obvious— the strengthening of the U.S Dollar. If there wasn’t clear before, our “manufacturing renaissance” from cheap natural gas and affordable labor to the inevitable currency tightening. China is slowing down and the ECB is purposefully lowering the value of the Euro.
I’m still new, and my knowledge is still extremely limited. However that being said we knew fed interest rates were going to go up for months now. We all anticipated capital inflows from developing currencies. Was the dollar not tremendously overlooked throughout the past year?
Macroeconomic fluctuations are usually institutional, global trends that aren't susceptible to the huge volatility of equities. For example look at the Hong Kong riots. A democratic demonstration caused a downtiurn in the S&P 500.
In other news the bond king quit. I dont know his name or really care. I’m not from New York and, luckily for me, hes not my boss. I’m still trying to find better blogs and podcasts. If you have any recommendations please let me know. Planet Money, Bloomberg news, FT, WSJ and the Economist make up the majority of my information. Played around with a few blogs earlier. More posts to come.