The Economy in One Chart [Its Bullish]

“Davidson” submits:

Industrial Production was reported this morning higher by 0.7%-the chart and link to the release are below. What is interesting here is that past 2 mos’ data have been revised higher so that the trend shows a rather sharp spike which can be tracked back to July 2013.

Economy Industrial Production

The economy has always taken precedence over market psychology.

1.       When the economic data shows a contracting trend in all components(at least 6mos) then eventually market psychology turns more negative.

2.       When the economic data shows an expansionary trend in all components(at least 6mos) then eventually market psychology turns more positive.

Market psychology and markets rise and fall in unison. If one has a grasp on the driving force for the former, one can develop reasonable expectations of the latter. I did not say predict which carries the implication that one can predict price/date. Many claim to do be able to do this accurately, but I think these claims do not understand that business returns cannot be accurately translated into market prices when prices are based for the most part on what investors think about the immediate future.

I think the most one can do is gauge the future direction using a long term view of past history/events/economics. One cannot say this price will be attained by such n’ such date.Industrial Production accelerating as we see today is contrary to the negative views we have seen the past several months, the market calls for 20%-50% corrections, recessions, financial collapse and etc.

The current Industrial Production trend which I think is easy to see in the chart, suggests that an investor turn towards a more positive market psychology should be anticipated. Higher stock prices should be anticipated.

Please note that CSX Corporation (NYSE:CSX) just reported strong earnings and CEO  Michael Jon Ward said ‘…business is strong.’ Link: CSX 4th Quarter Report

Via Valueplays



About the Author

valueplays
Todd Sullivan is a Massachusetts-based value investor and a General Partner in Rand Strategic Partners. He looks for investments he believes are selling for a discount to their intrinsic value given their current situation and future prospects. He holds them until that value is realized or the fundamentals change in a way that no longer support his thesis. His blog features his various ideas and commentary and he updates readers on their progress in a timely fashion. His commentary has been seen in the online versions of the Wall St. Journal, New York Times, CNN Money, Business Week, Crain’s NY, Kiplingers and other publications. He has also appeared on Fox Business News & Fox News and is a RealMoney.com contributor. His commentary on Starbucks during 2008 was recently quoted by its Founder Howard Schultz in his recent book “Onward”. In 2011 he was asked to present an investment idea at Bill Ackman’s “Harbor Investment Conference”.