Last night was a bit of an over-reaction I think, the OECD projected growth to slow down, and that prompted nervous selling once again. Nonetheless, I have the funny feeling that US interest rates, recently being talked up to be a “live possibility” from almost all US Federal Reserve officials, is likely to be bumped further. I’ll hazard a guess — it’s going to be concern about “deflation”, you know the opposite of inflation. Instead of prices rising, prices are going down. Now that might excite people who love bargains, but think for a moment here. If something you bought today say $50 shoes, would be cheaper tomorrow ($48), you would tend to HOLD off, right?! (Well no, if I really really like it hehehe ) But let’s go to practical terms — when your whole grocery bill will be cheaper every week, then you are going to just want to enjoy that savings and buy every week, unlike if you know that prices will rise, people tend to buy more ie. in bulk and store them. Companies sure like that. Yes they do, because they can get to sell MORE of their products and then, they get back their capital for producing the said products, pay off their loans faster from their revenues (which cuts down their borrowing costs). Translates to bigger profit margins. Yeah we like that.
Now where there is no urgency, there is less money coming in. In this age of governments trying to control their spending, and only businesses are hiring, that paints a bad picture. They would tend to slow down their hiring too.
The US economy may have had jobs growth, BUT wage growth, the data that indicates how much more people can have “extra” to spend, is still a little too low. 2.5% year-to-date which they say is the highest since 2010 may be good news, (article here ) but I go, what can I really buy with 9cents extra?
0.09 cents x 40 hours x 4 weeks = 14.40 per month.
But, it’s still good news considering what’s out there like the the dire Chinese situation with falling prices and continuing economic decline.
But like I said, Deflation is dirty word, nobody wants it. I think they will want to hold off interest rates (and keep money on people’s hands to spend) to help speed up spending and ward off deflation. (UPDATE – No less than the IMF agrees with me, article here)
Just to share about one of my latest trades, GILD was down for most of last week but I saw 2 days that it was bouncing off the low of 106.5, and I’ve promptly bought some shares. It’s also in very low PE level > less than 10 so you can say and that’s what happened last night despite the big fall early in the session by the major indices, it was diverging and climbed steadily throughout the day. I love bargains!
I will be sharing my favourite bargain-hunting techniques in the market as well as the best investments for women.
“Learn to Invest Event … for Women Only” happening on November 21 at the Ortigas Bldg, Ortigas Ave. Pasig City.
Feel free to bring a friend ! Email me at firstname.lastname@example.org to reserve your slot/s.
And before I forget, I’ve partnered with Finance Manila (owned by data provider ADVFN UK) to help widen the opportunities for their members. I will be offering the Low-Risk High-Reward Investing Workshop back to back with US Investing Workshop with a fantastic 2 for 1 deal and more to celebrate the partnership. Check it out here:
So join us there!
All Eyes On Consumer Discretionary Earnings after Strong Jobs Data — Part 2: Strong Wage Growth Was Seen in October