False positives the central banks and monetary policy around the world continue to put into the markets is the reason we continue to see up tick. The upward swings in the markets does not mean the fundamentals of economies around the globe are getting better. In fact, a much stronger case indicates the fundamentals of the economy are only getting worse.
The idea that a cut in interest rates by China will help our economy is lunacy. Will it help our markets? Sure. It is likely to increase some cash flows - possibly into markets, and particularly in commercial real estate as Chinese investors continue to seek out places to park money, so some sectors of the economy will benefit. But to see futures markets going up dramatically because of China cutting its interest rates is irrational at best.
No Sign of Recovery We have lost our focus. We are now incapable of looking at the real fundamentals of the economy. We are incapable of even looking back into history when stock prices went up because people were buying stuff. People buying stuff was good for companies. The more people bought, the more the companies needed to expand . . . meaning they were hiring people. They were paying more tax revenues. They were selling more goods, which means their bottom line got better, and their stock price went up. Why? All because of the economy - the fundamentals in the economy - doing far better, allowing people to prosper and buy more things. The more cogs, bells, and whistles people buy, the better it is for companies.
We should be able to understand this principle, but we don't because we have lost our vision. Politicians lost their vision many years ago, but what would you expect from politicians? However, you and I need to maintain some common sense through all this and understand what is really happening. Just look around. Wages have not gone up. There is so much slack in the labor market that nobody can dare attempt to get more wages by moving to the company up the road. It does not work that way anymore because the fundamentals of the economy are still very poor.
Release our Free market We need to let the free market economies make the markets instead of the markets enticing the free market economy to do things that will be bad for individual companies. We continue to live in an unrealistic environment where people around the world cannot - or will not - focus on the real fundamentals of the economy. We have all heard so many times that the underlying fundamentals are better than people think . . . and we believe it!
The biggest problem in the global economy today is not just consumer spending. It is not a lack of resources. It is not a lack of confidence by businesses and consumers. The biggest problem is monetary policy - instead of good, solid fiscal policies - driving things. I suppose as long as the rich continue to get richer and the long-term traders (which is about 30 days now) continue to play monetary policy, the long-term fundamentals will mean little. But never forget it's the fundamentals that feed families and prosper the next generation.