The Dog That Isn’t Barking

Posted by Brad McMillan, CFA, CAIA, MAI

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This entry was posted on Aug 17, 2012 8:34:16 AM

and tagged Market Updates, Yesterday's News

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The big story today is the most recent decline in Facebook shares, which was prominently reported in the Wall Street Journal (WSJ) with “Facebook Investors Cash Out” (p. A1), in the Financial Times (FT) with “Investors defriend Facebook shares” (p. 1), and in the New York Times (NYT) with “Facebook Shares Hit New Low Amid Fear” (p. B1). Sounds pretty bad, right, when a new tech heavyweight drops almost 50 percent from its initial price? Things must be bad?

The dog that isn’t barking—at most maybe whining a little—is that the U.S. markets are actually doing really well. Yesterday brought them back to relatively high levels, as reported all the way back on page C4 of the WSJ with “Stocks Approach Multiyear Highs.” With the markets doing as well as that, maybe it is time to worry. The fear referenced in the NYT Facebook headline certainly has not shown up in the VIX, referred to as the market’s “fear index,” which the WSJ comments on with “The Fear Gauge Goes Quiet – Too Quiet” (p. C1). We have had a quiet August, and when September rolls in and everyone takes a fresh look at the world politics and economy, perhaps they won’t be as sanguine as they are now.

Things to worry about include economic slowing worldwide. The WSJ has an interesting story, “Wal-Mart: Paycheck Cycle Spreads” (p. B3), about how the tendency for U.S. sales to immediately follow when government benefits are issued on a monthly basis, literally within minutes, is starting to expand to other countries. Wal-Mart is a great indicator of how the less affluent consumer buys, and its observation is excellent support for the idea that growth continues to go nowhere in most of the world. That idea is also supported by the NYT article “For Europe’s Tepid Economy, A Lost Decade Looms” (p. B1).

One other article worth noting is WSJ’s, “Scorched Corn Belt Still Reaps Top Dollar” (p. A2), about how prices for farmland have continued to increase despite the damage done to crops by the drought. This is the tip of a much bigger story on food and resource availability; I am working on a special report about that.

Have a great day!

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