Use access key #2 to skip to page content.

Valyooo (33.59)

Macro vs Micro



May 04, 2012 – Comments (7)

I have been investing since I was 5, but really only got into it around 2 years ago.  A trend I have noticed:

Macro numbers come out.  They are terrible.  Unemployment is bad, housing is bad, everything is bad, production is bad, our debt rating is bad, china is bad, europe is bad. etc.  The market plunges quickly.  Then, a lot of companies report good earnings, and the market climbs back up.

Two things: 1) Earnings are the only thing that matters to stocks, fundamentally, even though macro matters to wall street.  So I think the right play is wait for a macro crash, and buy before earnings season. 2) How is this possible?  How can the economic numbers be so bad always, but earnings keep increasing and beating estimates.  I cannot explain this at all.

I would like to say though, that I don't care about employment at all.  Unemployment is pretty high compared to average over our history.  I think it is a stupid number though, because 1) women work now too....I bet the "unemployment rate" was over 50% 100 years ago if you included women 2) we don't need as many workers, we have computers. 3) I would rather unemployment, than employment in house flipping, bridges to nowhere, etc.

Has anybody else noticed this?

7 Comments – Post Your Own

#1) On May 04, 2012 at 8:42 PM, HarryCaraysGhost (86.66) wrote:

Cost cutting moves (Unemployment) increase earnings, corporations were cutting everything they could during the great recession. Obviously they came out more profitable then before.

Hey man, I'm just curious- what were your stocks at five and do you still own any of them, if so I hope you reinvested the dividends. Still kicking myself for selling the KO that I had as a kid. It's a bitch to try and make up for lost time.


Report this comment
#2) On May 04, 2012 at 9:35 PM, awallejr (35.58) wrote:

Well that was the knock on stocks by the bears back in 2009, they argued that improved profitability was mainly from cost cutting as if that was a bad thing.  My counter back then was, of course, that is what you first do during a recession. 

But eventually you need revenues to increase, which we have seen.

The Headline news usually is just an excuse to do something.  I hate Bloomberg radio mainly because of that.  They always have to have a reason why the market is moving one way or another to the point where it became laughable.  Market up that day is because of the global recovery was seen as improving. Yet the very next day when market was down you heard that was because of concerns over the global recovery. 

Were instant polls were being taken?  Of course not.  It is the need for the media to fill 24 hours of air time.

Stick with profitability as a guide.  It is one of the few things I agree with Kudlow on.  If a company reports a loss don't bother with it even if it was "smaller" than expected.  A loss still sucks.

As for employment you do want that to improve since that would improve corporate profits further.  But generally it is a lagging indicator, meaning it starts to improve after companies hire more which they do when the economy improves.  Problem is right now the recovery in anemic.

I don't blame Obama for the mess but I do blame him for not acting more quickly and decisively when he had both houses of Congress in his control.  Bit of a digression there.

Here was a fun thread:

By the way I was a buyer today (XRX and MTL).  I am seeing prices in certain sectors that are way over bearish as to remind me of those prices back in 2009.

Report this comment
#3) On May 04, 2012 at 10:17 PM, HarryCaraysGhost (86.66) wrote:


Exactly, also should have added that companies that survived streamlined costs. Best example I can think of is the masking tape we used to buy for the shop was one inch wide, now it's 3/4". little things like that streamlined corporations into profitability.

Of course with profit comes the need to expand and hire more, to make more profit, just part of the cycle.

My leading economic indicator- stuff I have to do while at work (or SIHTDWAW for short) is up so I am a buyer also.

Full disclosure- I'm only buying KO in a DRIP.

Report this comment
#4) On May 04, 2012 at 11:04 PM, awallejr (35.58) wrote:

Wasn't it Buffett that said "no one ever went broke owning Coke"  (the soda that is heheh)?

Report this comment
#5) On May 05, 2012 at 11:35 AM, lemoneater (56.61) wrote:

In my microcosm of the Greenville, SC area, there has been gradual improvement. We were not as hard hit as other areas of the U.S. to begin with--not as much of a bubble. Real estate is moving, but lower end not lux. I've seen more jobs listed--entry and mid-level. Some new commercial construction is going up, gas stations mostly. New restaurant startups, etc. I hope that it is a good year for agriculture in the Carolinas. We had some rain recently that was greatly needed.

If gasoline futures are lower as another blog said that will lessen pressure on the lower middle class which lessen pressure on the businesses which serve them and will improve consumer sentiment overall, I believe.

I know Leohaas wants higher gas prices to force us develop to own energy. I also fervently wish to be less dependent on foreign energy. Why can't we contine researching sensible domestic energy options even when gas prices are not constricting? To plan ahead before problems get big is much smarter than just-in-time legislation which seems all that Congress is capable of at times.

Since I'm cheerful and encouraged in my little world I will send a smile your way. :)


Report this comment
#6) On May 05, 2012 at 3:21 PM, portefeuille (98.93) wrote:

I know Leohaas wants higher gas prices to force us develop to own energy. I also fervently wish to be less dependent on foreign energy.

You can probably buy a 250 mpg car from Volkswagen soon, see this post ...

Report this comment
#7) On May 07, 2012 at 10:23 AM, Valyooo (33.59) wrote:

I owned LMT when I was 5 from candy sale money I won.  I sold right after they won the contracts after 9/11.  Bought at 17, sold in the mid 50's.  Then I bought ebay, made about 200% on that over a few years.  Those were my two investments in my pre-market-following years.

Report this comment

Featured Broker Partners