""The NFP report is pure unadulterated garbage."
Agreed. 100%. Especially, in light of poor recent ADP payroll numbers (which I posted here a couple nights ago, new thread), announced layoffs, and earnings disappointments.
But as one often hears, perception is reality.
What counts is not the garbage (Zero and others will expose it for the crap that it is, as inevitable will folks here), but it's the market's reaction to the garbage that counts i.e. what the market chooses to do with it, not what you or I might think.
I saw and heard many very smart experienced Fund Managers say in the late 90's in US, these stock valuations are absurd, bizarre, nonsense, insane, hyped etc. (and of course they were right)...saying "I won't get in until there's a meaningful pullback, reversion to the mean", whatever...it never happened, with the exception of the brief Russian Debt default of 1997-98 , despite the collapse of LTCM and their genius Nobelists on staff (they were long Russian Bonds) and associated collapse of the Asian dragons (tigers?)....recall Suharto was deposed after 30+ years in power.... i.e. not a trivial impact.
LTCM was bailed out by 12 NYC Banks (orchestrated by the NY Fed, but paid for - reluctantly - by those banks, not the taxpayer), during which the Fed then implemented the infamous Greenspan Put and then cut rates radically (so adding fuel to the fire), and it was as if nothing ever happened. The bull resumed without flinching.
In the end it all came crashing down 3-4 years later, in March 2001 (aka "tech crash" "dot com bubble" - which it was not).
The point is, those very smart Managers missed out completely on the the most epic stock rise in US history from 1995-200, waiting for a pullback to normality which never happened. Talk about missing the boat, because of a blind adherence to
i.e the market is always right, even if it's irrational (which it clearly was, based on "fundamentals" aka "the real world")
Fast forward a dozen years to QE and the corporate stock buyback binge surge of 2009-2015/2016, the "most hated bull market in history". Yes, we all know how it was fueled (and still is, by continuing stock buybacks), and yes, out of whack with fundamentals.
But, had you done the same thing as those experienced Fund Mangers I mentioned above , you'd have missed out on a similar run, the second longest bull market in US history, from an S&P low of 750 post GFC trough to 2,100 (June 2009-May, 2015), almost a tripling, in the most diversified - and my implication, the safest - investment of all (the whole market). You don't even get this return in Property, not even in Oz.
In 2011-2012, I myself told my ex-wife in NY to invest in S&P 500 index for our daughter's College Savings Plan, saying go with the trend, a bull - she didn't, but put it in conservative Fixed Income Funds (claiming child being being close to College age - but some are understandably frightened of the roller-coaster that is stocks, with reason...), yielding next to nothing, even losing money.
So, what's the lesson here?
In a nutshell, don't fight the tape (or the Fed - two separate, but equally true slogans). No one gives a Shiite what you (or I, or even experienced Fund Managers) think.
Again, the market is always right (however irrational one might think it to be). It's bigger than all of us. One day, it's irrationality will become exposed, and people will jump ship, en masse, and we'll see the aftermath of a bursting bubble, which is always, always ugly (never uglier than the GFC, which I have deliberately omitted...another story). I've lived through several. I can't say when this bubble will burst, I'm not into the perennial human folly of prediction, but I have (previously) given some ideas on this matter, for those who've read what I've Posted here in the last week(s).
But in the meantime, I guess the lesson is - as others have said here, and been ignored - trade what you see, not what you think.
Soon the US Employment Situation for April (NFP) will be released (11:30 AEST).
I may post the numbers, as I often do.
Let's see what they are, and more importantly, what Mr. Market thinks.
When Genius Failed: The Rise and Fall of Long-Term Capital ManagementPaperback – October 9, 2001
by
Roger Lowenstein
