Bill Wood Analytics

This Week’s Market Calls

Our greatest national asset is our robust marketplace for ideas. Why else would we invent the internet? And as in all healthy markets, the valuations for ideas fluctuate.

Here are this week’s ideas which I feel need a re-valuation. Some are tongue-in-cheek…some are humorous…some are serious. All can affect the choices of individual citizens/market participants.

Enough of the Echo Chamber Already…I am not saying these concepts have no value, but recently they have become a little too precious.

1) Uncertainty – There is ALWAYS uncertainty in the marketplace, in the economy, in life. This is not a reason to talk yourself into a recession. A few years ago, the new buzzword in business strategy was VUCA (volatility, uncertainty, complexity, ambiguity). This concept is not just catchy because of its military origin, it is useful description of market reality. But we cannot keep complaining about it

2) Trade war – I believe in free trade. That is not what we have. I am not too worried about tariffs on Chinese goods because I don’t buy many Chinese goods. I am familiar with the idea of short-term pain to achieve long-term gain. That’s another way of saying delayed gratification. I am not sure that’s what we will get. I am sure that increased scrutiny of the nefarious activities of China’s ruling elite is a scary, but necessary process.

3) Brexit – There is a lot of entertainment value in watching the UK Parliament, and this issue gives us a chance to watch more often. All this drama provides little value in trying to forecast the effects of Brexit.

4) The Fed – There is no useful way to predict the outcome of their actions. There was a time when nobody paid attention to the Fed. Now market analysts sit on the edge of their seats waiting for a hint of the next adjustment of 25 basis points. Not worth all the recent bother, not worth the texts from the President.

5) The NFL – I am already sick of all the hype, especially about the league’s increased involvement in social movements. Football is a violent sport for boys and young men. That is why it is popular. But it is a poor place to generate positive changes in our society. Let’s encourage the NFL to stay in its lane while we steadily reduce our infatuation with sports that are inherently based on head-to-head collisions.

A Rational Approach in a Gut-Instinct World...These concepts are on the radar screen, but they are worthy of greater attention.

1) Uncertainty - Ironically, it is too much certainty in the market that causes bubbles, and bubbles are always a precursor to recessions. Remember that markets climb a “wall of worry.” Anyone can manage when times are good. Uncertainty puts a premium on skill.

2) Hong Kong – “Ask me my opinion, my opinion will be/Natural situation for a man to be free” (The Rascals, 1968, for any of you not from my generation). Young people protesting to protect their civil rights. Has a familiar ring to it, does it not? Perhaps, we will see the rise of a leader like Washington, MLK, or Mandela.

3) Trade war – This could be the best thing for the revitalization of the US manufacturing sector since China was granted Most Favored Nation status by the World Trade Organization. Prices for some products will likely rise in the near-term, but the benefits derived may be more than enough to justify the cost. The long-term costs to our overall economic health may be drastically reduced. And don’t forget Hong Kong.

4) Back-to-School (Education) – If a college football (or basketball) coach is the highest paid publice employee in your state, then the public is not placing a high enough value on real education. Coaches should be teachers, but they should not make substantially more than other good teachers in academic subjects. Please don’t try to tell me coaches generate revenue and are therefore worth the expense. This is an example of a market failure because it is substituting entertainment for education. Well-educated citizens are the real generators of revenue. Education is an investment that always pays dividends, entertainment (such as big-time college sports) is a consumption (distraction) with a sketchy record of returning real value to society.

5) Farmers’ markets – Real producers selling quality products to consumers. A pure expression of a free market system. If you have access to a good farmers’ market, I can think of few other examples that offer as much value or pleasurable interaction or community building between buyers and sellers.

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