I'm Right Again Dot Com
A new commentary every Wednesday — January 13, 2016
WHAT'S WRONG WITH THE STOCK MARKET
I am a "Chartist." I paid my dues by misinterpreting stock charts many years ago. I've long since learned that technical analysis has a fault. It cannot account for emotion. My first verification of this came about on the day President Kennedy was assassinated. For years, all of the prices of commodities had been climbing upward, as Americans watched and took empathetic pride in him and his handsome family. We felt that we were also Berliners, when he spoke at the Brandenburg gate. The fashion world turned on Jackie's latest mode. We doted on the Kennedy children, playing in the Oval Office.
And then, on November 22, 1963, a psychotic societal misfit, Lee Harvey Oswald, shot and killed John Kennedy and wounded the governor of Texas in downtown Dallas. Most everyone alive nearly 53 years ago can tell you where they were the moment they heard the shocking news. (I was in a new bicycle shop in Tucson, trying to sell radio advertising to the owner, when I heard Walter Cronkite announce the death of our president over the radio.) I never returned to resume my sales pitch. I avoided looking at the shop as I drove down 22nd Street ever afterward.
Fear and uncertainty engulfed the nation immediately. The situation on Wall Street was immediate and chaotic. Within seconds, prices of all stocks plunged. So much so, Wall Street suspended trading. The New York Stock Exchange shut down at 2:07 pm that day and the nation went into mourning. After that, the order of events are blurred by time. President Johnson being sworn in aboard the Presidential airplane, the widow and two children at the coffin in the rotunda, tiny John saluting, the perpetual flame in Arlington.
The market drop, even after that terrible day, was short lived, as it was during the earlier Cuban missile crises.
So now, here we are 53 years later, and even though investors have had a bumpy ride, especially in the last decade, the volume of trading and the prices of commodities reached new heights.
Then something sobering happened in China. I saw something very recently: television reporters visiting a entirely new city in China filled with miles of empty high rise apartments—an almost unworldly experience. Could there have been a more ominous sign?
It was if a bomb had been set off in Chinese stock market exchanges to celebrate the New Year. (After all, they invented gun powder.) The Shanghai Corporate Index has dropped 15% already this year. Prices on the Hong Kong stock exchanges are at their lowest in two and a half years.
There has been a negative effect on the world economy. The Standard and Poor's index of 500 U.S. stocks is struggling to find support on the positive side of the precipitous drop in August.
Though I have been a modest investor for a half-century, I am not equipped to offer fundamental analysis on the reasons for this. but it is well worth noting that we spend more on imports from China that they do in exports from the USA. The middle class in China is growing faster than any other segment. It is getting younger. Pressure on the Communist hierarchy is forcing a transition from a "slave-labor" economy. Ultimately, this is going to be good for China and good for us. We will better compete in a richer market. Perhaps the balance of payments deficit will turn in our favor.
I suppose I am what is known in market parlance as a "contrarian." When the market hit a new high, I sold. If the market finds support from a recovering American economy, I might be encouraged to be dedicated investor, once again. There are those who predict that we are headed for a plunge never seen since the Great Depression. So much a better time to take some of those moldy old greenbacks from under the mattress and invest in America.
-Phil Richardson, Observer of the human condition and storyteller. "He goes doddering on into his old age, making a public nuisance of himself." - Joseph L. Menchen
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