What Matters Most?
By Tyler Durden
Via ConvergEx's Nick Colas,
Today we engage in a simple thought experiment: what 3 pieces of information would you need to confidently call the 2016 end-of-year level on the S&P 500?
A brief survey of senior Convergex traders yielded this list: year-end worldwide central bank rates, Chinese GDP growth in 2016, actual 2016 US corporate earnings, the winner of the U.S. presidential race, and the pace of increases in the Fed Funds rate for the year.
When we posed the questions to analyst friends, they added: 2016 U.S. wage growth, 2017 consensus corporate earnings (in December 2016) and any information about a significant geopolitical event. Everyone agreed oil prices were on the list.
All this pushes two other questions to the fore. First, what’s on your list, and why? And second, what’s not on any of these lists? Because maybe that’s what will actually move markets…
The 1920s were a period of immense technological innovation, but that didn’t stop many prominent thinkers of the age from believing that the living could speak to the dead. Sir Arthur Conan Doyle, creator of the deeply rational Sherlock Holmes, wrote more than a dozen books on the topic. French Nobel Prize winning physiologist (awarded 1913) Charles Richet was the original “Ghostbuster”, coining the term “ectoplasm” decades before Bill Murray ever got slimed. Even Thomas Edison thought about building a telephone to reach into the next world.
As a result of this air of respectability, tens of thousands of mystics plied their trade in Europe and the U.S., including one Mary Carter of Cincinnati Ohio. She had an especially powerful shtick in her repertoire. During a séance an assistant would place a small clean chalkboard in a box on the table where participants sat. They would ask their questions of people in the afterlife, and when the box was opened the slate would reveal the answer. A neat bit of magic, if nothing else.
In the mid-1940s, her son Albert Carter borrowed the idea to create a toy that is still popular today: the “Magic 8 ball”. Essentially, it was two dice with words (‘Yes’, ‘don’t count on it’, ‘it is certain’, etc.) printed on them, suspended in can of oil with a clear top. Ask a question, shake the container, and wait for one of the die to float to the surface with your answer. After he passed on, his partners licensed the idea to Brunswick Billiards as a give-away item to promote the brand. The container became the now well-known black sphere resembling an 8-ball.
Predicting capital markets action can, at times, feel much like using a Magic 8 ball. You ask a question, wait, and the market returns with an answer. Sometimes you like the answer, and sometimes you don’t.
But what if that plastic black ball became a crystal one instead? Those are …read more
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