Quote of the Day: A Silver Lining in the GDP Report

As I stated yesterday, we'll be focusing more on the economy this week here on the blog. Here's a little appetizer via Bespoke Investment Group:

• The rebound in business investment (strongest contribution to growth since Q3 2014) is extremely encouraging, and suggests that the soft patch in US business investment driven by declining Energy sector capex is ending. Business non-energy structures investment was a bit weak but equipment investment was very strong, as were housing-related series.

Capital investment has been something that, on balance, has been sorely missing -- even before the huge decline in oil prices -- during the present expansion. The past several months have seen a pickup, as confirmed by the GDP report. While much of the recent surge in structures owes to the energy patch, the strong equipment numbers (not to mention housing) speak positively about economic prospects going forward...

A Letter from China Inc.

In the following, I stray into sensitive territory I know for some of my readers. While I expect a little keep-it-on-the-markets-Marty feedback from an unsympathetic soul or two, I must -- in my own defense -- express my own humble view (one shared by economists not captured by political interests) that a true free trade policy (unilateral even) would be the most market (not to mention consumer at all rungs [especially the lower] of the economic ladder) friendly endeavor Washington could pursue.

If you read this with an open mind you may find yourself embarrassed by its simplicity. But, please, don't be too hard on yourself. Most of us simply don't have the time to scratch beneath the surface of economics and we, therefore, take verbatim the stuff couched in ways that make sense at the first, and, alas, only, blush. Truly, the couchers are adept at identifying and exploiting our grandest misconceptions.

Quotes of the Day: Europe's bullish narrative intact...

My quote of the day last Thursday spoke to an improving Euro Zone economy. Looks like earnings support the narrative, as do investment flows:

Europe Starts Earnings Season With a Bang, Leaving U.S. Behind(Bloomberg) -- No false dawn this time. After years of disappointments, European companies are finally living up to market expectations, enjoying their best season in almost seven years as earnings per share grow at more than twice the pace of their U.S. counterparts. About a third into Europe’s first-quarter earnings season, companies listed on the Stoxx Europe 600 Index have so far reported a 24 percent jump in EPS year over year ... 

Investors Are Pouring Money Into European Stocks Like It’s 2015{Bloomberg) -- The evaporation of political risk in Europe is seeing money managers rush into the region’s stocks at a clip not seen since the year the equities last surged to an all-time high. Buoyed by relief over the outcome of the French first-round vote, investors poured $2.4 billion into European equity funds in the week through April 26, the most since December 2015 ...

This Week's Message: To be successful at investing, imitate The Great One. And I don't mean Warren Buffett

Yesterday evening I found myself in deep discussion with a gentleman who, among other things, builds basketball courts. Other than his stated belief that his company is "the Rolls Royce" -- as opposed to "the Volkswagen" -- of court construction, I found him to be generally humble. He told me about a man he once worked for, when he was learning the demolition business (he later founded his own such business), who acted as if he was the inventor of everything having to do with structure destruction. While sharing his story, he chuckled, and said "I wonder how people knocked stuff down a hundred years ago without this genius telling them how to do it". His boss's bravado aside, he admitted that he indeed learned a great deal by watching the man work.

Bonus Quote of the Day: Yes -- for now -- The Euro Zone is Looking Up!

Despite the Euro Zone's usual geopolitical risk (I say "usual" because the place has been a hotbed of political risk for the past several years), I've been talking up its prospects -- both in terms of its economy and its equity markets -- to clients for months.

Here's Bespoke Investment Group on the EZ's most recent economic data:

Economic data today in Europe has been broadly good as prelim April Spanish CPI beat estimates, Germany consumer confidence beat, CBI reported retail volumes surged (though the more predictive 3m average remains subdued, chart), and Eurozone survey data surged. Consumer confidence matched the cycle high of -3.6, industrial confidence made a new local high and signals industrial production growth of over 6% YoY, and economic confidence suggests GDP growth of 2.5% YoY which would be near 2011 highs. The big disappointment was Spanish unemployment, where the rate missed estimates.

And here's a look at how well Euro Zone equities (using our preferred Euro Zone ETF) have performed relative to the U.S. so far this year:     click to enlarge...

This Week's Video: The Not-So-Great Bond/Stock Debate

Once playing, click the icon in the lower right corner for full screen. Focus should occur after a few seconds; if not, click the wheel to the left of the YouTube icon to adjust:

Quote of the Day: Worthless White Noise

I swear, not a day goes by where I don't catch a headline, or a passing comment from someone who truly ought to know better, that has me thinking precisely what Michael Covel points out in today's quote.

Yesterday, for example, I walked into my office to find my television on. I was surprised, for two reasons: 1. I didn't know it still works (that's how long it's been since I've had it on). And 2. It was turned on.

At the time, Nick was setting up my computer (we're remodeling and last weekend the new carpet happened), he swore it wasn't him. My best guess is that the folks who reassembled the hutch upon which the TV sits tested to make sure they plugged it back in properly and forgot to turn it off. What made it particularly annoying was the sight and sound of CNBC's Rick Santelli (I recall him from years past while I was learning that there was absolutely nothing to learn by watching financial television) working a dry erase board and describing some dynamic about the dollar that deserved hollering at the camera in the most condescending fashion. The problem I have (my palpable annoyance, that is) is my recollection of past rant-filled predictions -- the majority of which of course turned out to be utter intellectualized rubbish.

Not to single out Mr. Santelli (he just happened to be the one on the tube when I walked in), for he's just one of the many whom the media trots out who apparently can't (we know this, trust me, otherwise they'd be trading, never talking at cameras, during the trading session), therefore they teach, or, as the case may be, they preach.

From Covel's The Little Book of Trading (an insightful read, by the way):

White Noise

Watching the news, reading the financial news and listening to the President is not how you make money in the markets. You don't make money by explaining what just happened or by guessing what's going to happen in the future. You don't know what's going to happen in the future, the things that occur in the future that make you money are all things you couldn't figure out were going to happen.

It always makes for an interesting story to say "well this is going to happen because this or that'; that is information everybody already knows, it's already baked into the market price.