Fundamental Macroeconomics

Read & Listen To What's Reported & Discussed

Every day, I’ve encountered a new “trader” who has developed the “latest & greatest” system that is never wrong. We should drop everything and listen to them, eh? After all, they are simply never wrong. They’ve been doing this for at least how long it takes for a newborn baby to learn to crawl. I’m 55+ years into the “experience” necessary to become and remain successful in this industry. It’s a marathon folks, not a sprint.

Technically, charts and more are beneficial once a solid fundamental analysis is done. It’s not just the numbers advertised by the listed security analysts, no, there is more. I am dependent upon what I read and hear and I do a lot of that. Regardless, patience is what’s necessary as different prognosticators believe different types of analysis. Being a long-term position investor and hedger works. No one possesses a completely 100% effective crystal ball except for those who claim they do. Disregard them, for they are at best novices at trading anything and still need their diapers changed regularly.

What’s Happening Macroeconomically

As a refresher, let’s talk a bit about what macroeconomics is:

Macroeconomics helps to identify and analyze all business cycles; and fluctuations in the economic activity characterized by periods of “expansion and contraction”. Doing so assists in predicting economic trends and adjusting overall investment strategies accordingly.

Macroeconomics provides an insight into several factors “contributing” to long-term economic growth and development. It “examines” basic productivity, technological advancements, and investment in physical & human capital. Macroeconomics helps us understand the causes and consequences of inflation and the role of monetary policy in controlling inflation and promoting price stability. Macroeconomics highlights all causes and types of unemployment and their basic impacts on the overall economy. It provides a framework for analyzing labor dynamics, wages, and policies to reduce the effects of unemployment. Macroeconomics helps determine the appropriate monetary and fiscal policies to promote economic growth, price stabilization, and mitigation of economic crises.

It’s really pretty simple but has a tendency to get “screwed” up when those listening to what’s spoken of insert their own opinions into the decision. If you have two ears and two eyes chances are you have listened to or watched one of Jerome Powell’s Federal Reserve members lecture recently. Have any of you heard them say it’s time to bring interest rates down? Unless you are watching something I’m unaware of, the answer is no. Still, even some of the “big boys” on the “street” are preaching that the “rates” are heading lower, perhaps three times before the end of the year. If you believe in that ask me about a bridge I have for sale over the East River. It’s cheap.

A Rule We Follow

At some point interest rates are going to come down but no one knows when. Earning 5%+ just waiting for that to happen works well for me, I’ll wait. In the interim, interest earned exceeds the inflation rate so in a tax-free Roth IRA environment I’m happy. It’s an election year so anything can happen, politics rule, but in reality, rates are going to stay higher for longer.

Too many people look to make something out of nothing and trade too much. Do not overtrade. I don’t trade much. In a prior lifetime I traded more. The “reflexes” are not there anymore, neither is the interest. Always trade within your own boundaries; wait for opportunities to arise, those that you plan for, the ones that “find you" versus just shooting “buckshot”. Good trades and investments will find you as long as you have a consistent, well-thought-out plan and you’re patient.

Not much happening in the world today so we took advantage of the doldrums. I hope you are doing the same and “sitting on your hands” like we are. Watching the Yen and keeping my eyes and ears on what the Federal Reserve members are saying is enough at this time. Sometimes it is best to do nothing and that’s obvious today.

“It’s not time to make a change”. As a matter of fact, it’s time to watch, listen and not do much of anything. Take what’s given to you. Quit trying to wedge your ideas into something that is simply not there. Are you one of those “newbies” I’ve encountered? You know, the ones who are never wrong. If you are reading or listening to them then turn off that noise. When I see them raise their heads, be it on the “Meme” stocks or otherwise, I just laugh and if anything, take the opposite side. More often than not I just dismiss them but they’re everywhere. Skip their advice as they are teaching you the “wrong way”.