As we say in this week’s Subject Line; data is not information. And to that we shall add:

  • Information is not knowledge.
  • Knowledge is not understanding.
  • Understanding is not wisdom.

We can thank the astronomer and technology writer Cliff Stoll for his somewhat pedantic observation — even if he had no idea of its eventual usefulness in our describing the current challenges of deciphering the true meanings behind the mountains of data points at the roots of the existing state of the economy, not to mention the speed and direction of its internal inertia. If all that sounds very difficult and complicated, well it is. But there are no limits to serving our clients. So ‘Dang the torpedos’! It’s full steam ahead!

Even in normal times, April is one of your more difficult months from which to see the future. This year it was, and continues to be, even worse as the rotation from a self-induced recession stumbles along seemingly unable to get out of its own way. Shortages exist in commodities but not because of actual shortages at the sources. No, instead we have the herky-jerky motion of supply lines getting back up to speed. Energy costs are spiking but, according to many of Biden’s detractors it has more to do with pipeline politics than petroleum and gas extraction. Not helping was that a single company, Colonial Pipeline, carries a dangerously high percentage of the total oil and gas supplies to our Eastern States. All that very vulnerable supply was easily interrupted by one ransomware attack.

News media even had their own ‘bottlenecks’ of information flow as the New York Times reported: “Colonial Pipeline, a vital U.S. fuel artery that was shut down by a cyberattack, said it hoped to restore most operations by the end of the week. Since the shutdown, there have been no long lines or major price hikes for gas”. Of course, they had to walk that back as pictures of long lines and high prices filled the TV networks news shows.

Another area of ‘fake’ shortages is found in the labor pool. Last week’s jobs report came in at about 1/3 of what the experts had forecast. Businesses across every strata of commerce are desperately seeking Susan, Brad or just about anybody to please come to work. And yet, concerns about personal safety, childcare problems, accelerated retirements, employees on furlough have all shunted interests in the idea of returning to work. Related to this is the dicey question of: “Are people just staying home as long as the unemployment benefits are running at bonus levels?”

Speaking of enhanced benefits – all of which seem Covid related – the extra cash provided by stimulus checks may be artificially supporting retail sales, not to mention the extra moolah showing up in savings and investment accounts. Moody’s analyst Charlie O’Shea summed it up with “It’s really hard to parse through it all and figure out what the consumer is really thinking.”

Sam Ro, Managing Editor at Yahoo Finance writes:

Credit Suisse economist James Sweeney really drove the challenges of the current environment in a note published following April’s U.S. employment report that some forecasters called the biggest disappointment ever.

“Investors are suffering from a data fog: some incoming high-frequency data are atypically uninformative; forecast errors are larger than usual; and unhinged narratives are circulating freely, as observers cherry pick numbers to fit stories,” Sweeney said.

“One key question facing investors and policymakers now is about how high US inflation will go and how persistent elevated inflation will be,” Sweeney said. “But inflation data are now being thrown higher by base effects, and ubiquitous anecdotes suggest businesses are struggling to hire and, in some cases, raising wages. US average hourly wage data, which have suffered from pandemic-related composition effects, might give little help signaling wage pressure.

“In the near-term inflation and wage data are unlikely to resolve this debate, but perhaps by mid-summer, when stimulus checks are long since sent, clarity could emerge,” he added. “For the time being, investors must navigate the fog.”

With those paragraphs, perhaps Mr. Sweeney made the jump all the way from data points to wisdom.

Ron’s Market Minute — Does it Matter?

Most regular readers of our weekly eLetters know that we use technical analysis to try to find the strongest parts of the markets. Then we design portfolios so that we hold more of the strong stuff (technical term) and less of the weak stuff. Sometimes this is pretty easy. Here’s a comparison of technology holdings over the past three years. Tech is in green, and for comparison, Energy is in red. As I said, seems pretty easy to see that tech was the better place to be.

And usually someone will ask, ‘does it matter that much?’ So, here’s a chart of this year since Jan 1st. Again, tech is in green and energy is in red. 

Seems pretty easy to see that tech was NOT the place to be. And that’s why we keep looking at the strength of the various investments. One of Warren Buffet’s most often quoted lines is ‘The sun is always shining somewhere’. Technical Analysis is a great tool to have when you are searching for the sunshine.

 Ronald P. Denk, CFP®
Investment Advisor
Denk Strategic Wealth Partners
10000 N. 31st Avenue, Suite C-262
Phoenix, AZ 85051
Phone (602) 252-8700
Fax (602) 252-8701
Toll-Free (877) The-Denk
www.denkinvest.com

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Ron Denk is a Registered Representative, offering investments through Lincoln Financial Securities Corporation, Member FINRA/SIPC.

Mr. Denk is also an Advisory Representative offering services through Denk Strategic Wealth Partners, a Registered Investment Advisor. Denk Strategic Wealth Partners is not affiliated with Lincoln Financial Securities Corporation.

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Past performance is not a guarantee of future returns.