Two Key Indicators Giving Us a Glimpse of What's Coming
Let's look at two key indicators that may give us a glimpse of what lies ahead for our economy before we wrap things up for Thanksgiving Week: the Pfizer/Allergan deal and the price of copper.
The Deal
The merger of Pfizer and Allergan merits headlines, but something important is missing. Yes, it's an "inversion" deal, one that makes sense not only because of synergies between the two companies' businesses and the resulting economies of scale, but also because with the merged company based outside the U.S., better corporate tax treatment will accrue to the bottom line. Note, however, that because of the size of the deal, the Justice Department needs to review the particulars before the deal can go through. It's always possible they'll declare that the combined company cannot be permitted to exist under anti-monopoly legislation.
But what's missing from the current reporting though is this important fact: Deals like this - i.e., mega deals - typically occur at the tail end of bull markets. They indicate a top forming. They serve to remind us to be vigilant and look for a more significant turn down than the one we saw in August-September.
Copper
In the investment world, copper isn't just another commodity, a part of the metals complex. It's got the nickname "Dr. Copper." That's because it's considered a reliable indicator of the general trend of the economy. If that's so, look out below: The diagnosis from Dr. Copper doesn't bode well for the future health of the world economy. Specifically, it appears to be indicating a serious dislocation in China's manufacturing economy. That one you can take to the bank. But we might consider how this will spread - or is already spreading - to the rest of our world. While the price of copper hasn't decisively indicated it's heading for the 2009 lows, things do look threatening.
So there you have two key indicators that could be speaking, or maybe even shouting, at us. There's nothing in this that indicates timing, but if a top continues to form, at some point it will turn down in a more definitive manner than we saw recently.
With that securely tucked away in our little financial satchels we set them aside now and turn our attention to what really matters in life: our family and friends, never mind good food and drink. Yes, it's the glorious Thanksgiving holiday now upon us. Sure, the stock market will open on Friday, and sure, we'll keep at least one eye on it. If something of note occurs, well, we'll duly note it. Otherwise, let's all relax, count our blessings, and thank the good Lord for all He's given us this year.
One last work, though, before the celebrations begin.
Richard Russell, who wrote Dow Theory Letters continuously since 1958, the veritable dean of investment writers, dies Saturday at the age of 91. He had been suffering the ravages of old age for a number of years, but continued writing until a week before he died. I don't remember how I first happened upon Dow Theory Letters, but it remains one of the best investments of time and money ever. Even more than what I learned about investing, however, Mr. Russell was a fine writer who shared much of his life experiences, from his youth during the Great Depression, through his service as a bombardier in the Army Air Force during World War II. I always looked forward to what he had to say. Rest in peace Mr. Russell. I'm most thankful for all those hours spent reading your Dow Theory Letters.
The Deal
The merger of Pfizer and Allergan merits headlines, but something important is missing. Yes, it's an "inversion" deal, one that makes sense not only because of synergies between the two companies' businesses and the resulting economies of scale, but also because with the merged company based outside the U.S., better corporate tax treatment will accrue to the bottom line. Note, however, that because of the size of the deal, the Justice Department needs to review the particulars before the deal can go through. It's always possible they'll declare that the combined company cannot be permitted to exist under anti-monopoly legislation.
But what's missing from the current reporting though is this important fact: Deals like this - i.e., mega deals - typically occur at the tail end of bull markets. They indicate a top forming. They serve to remind us to be vigilant and look for a more significant turn down than the one we saw in August-September.
Copper
In the investment world, copper isn't just another commodity, a part of the metals complex. It's got the nickname "Dr. Copper." That's because it's considered a reliable indicator of the general trend of the economy. If that's so, look out below: The diagnosis from Dr. Copper doesn't bode well for the future health of the world economy. Specifically, it appears to be indicating a serious dislocation in China's manufacturing economy. That one you can take to the bank. But we might consider how this will spread - or is already spreading - to the rest of our world. While the price of copper hasn't decisively indicated it's heading for the 2009 lows, things do look threatening.
So there you have two key indicators that could be speaking, or maybe even shouting, at us. There's nothing in this that indicates timing, but if a top continues to form, at some point it will turn down in a more definitive manner than we saw recently.
With that securely tucked away in our little financial satchels we set them aside now and turn our attention to what really matters in life: our family and friends, never mind good food and drink. Yes, it's the glorious Thanksgiving holiday now upon us. Sure, the stock market will open on Friday, and sure, we'll keep at least one eye on it. If something of note occurs, well, we'll duly note it. Otherwise, let's all relax, count our blessings, and thank the good Lord for all He's given us this year.
One last work, though, before the celebrations begin.
Richard Russell, who wrote Dow Theory Letters continuously since 1958, the veritable dean of investment writers, dies Saturday at the age of 91. He had been suffering the ravages of old age for a number of years, but continued writing until a week before he died. I don't remember how I first happened upon Dow Theory Letters, but it remains one of the best investments of time and money ever. Even more than what I learned about investing, however, Mr. Russell was a fine writer who shared much of his life experiences, from his youth during the Great Depression, through his service as a bombardier in the Army Air Force during World War II. I always looked forward to what he had to say. Rest in peace Mr. Russell. I'm most thankful for all those hours spent reading your Dow Theory Letters.
Happy Thanksgiving!
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