Before we get to dwarf bowling, what’s going on in the stock market? A round of central bank intervention in Japan, Europe and the US hasn’t sent the market soaring. In fact, it’s fallen. Why?
Denis Ouellet from News-to-use.com reckons QE may not affect the stock market after all. At least, that it might not be the primary driver. Conventional wisdom reckons money printing is causing share prices to go up. And the charts back up that story. Each time money is printed, shares rise.
But there’s another chart with the same relationship. Corporate profits, or earnings per share, are rising with equity prices too. It might seem blatantly obvious that earnings drive share prices. A business is worth what it makes in profits. But what happens if profits fall while the money printing continues? We may be about to find out.
Ouellet’s third chart shows that sales haven’t risen with the stock market in the same way profits have. By the way, this means you can’t say that inflation is increasing dollar profits at the same time as share prices.
No, the earnings must be coming from somewhere else if sales haven’t been rising as fast as profits. Oullet knows where: ‘Cost cutting (mostly labor) and increasing productivity.’ If you fire your least productive worker you get both.
But that only works for a while. Eventually, sales will limit profits. Suddenly the earnings growth analysts expected based on the past will fail to materialise. And then stocks could fall, money printing or no.
Greg Canavan was onto the story of suspiciously high corporate profits in his August issue of Sound Money. Sound Investments. Of course, not all stocks experience this problem at the same time. Some are even set to benefit as things begin correcting. The secret to how this will happen is in currencies.
And Australian investors are in the perfect position to profit. We’ll reveal how once we’ve whittled down our list of Aussie companies set to increase profits while others fall.
Better than AFL
When you get bored of the Grand Final, somewhere in the second quarter, why not try the other sport Australia invented – dwarf bowling. In case you haven’t tried it before, you’ll need the following: Baby oil, bowling pins, a rubber sheet and at least one dwarf. But here’s the crucial bit.
The dwarf has to agree to be thrown at the bowling pins. So you’ll probably also need quite a bit of cash, a helmet, and extra baby oil.
In all seriousness, dwarf bowling isn’t ok. But does that mean we have the right to prevent a dwarf from doing it? Can we take away his or her right to agree to such activities? Should the government ban dwarf bowling?
Sure, politicians can make whatever rules they like. So what else can we ban?
What about that movie trailer which sparked riots across the world? The one depicting the Prophet Muhammad doing all sorts of odd things, like talking to a donkey about its love life. We can’t have that; the donkey may have felt embarrassed.
We must ban things that are offensive enough to cause riots and murders. After all, what’s more precious than the human life lost during the riots in Libya? The loss of a dozen CIA operatives and contractors during the riots dealt a massive blow to the region’s peace and stability. Peace and stability, that’s why the CIA was there after all isn’t it?
On another subject, we’re half way through the popular book ’50 Shades of Grey’. And, to our relief, it’s is all about why masochistic sex and prostitution should be banned by the government. A rich guy pays the protagonist for her submission.
But prostitution is only ok if you’ve registered with the Australian Office of Regulatory Services (ORS). And pay income tax. Otherwise, it’s so immoral it must be stopped by the police…who aren’t immoral, and who of course don’t accept bribes or favours.
But there is one ban we can all agree on. ‘Child-labour balls’ shouldn’t be given to guests at North Melbourne’s grand final breakfast. Even if they are just AFL balls stitched by child labour. We can’t have children earning money to support their families. Especially in poor countries where they have no other source of income.
So what’s the point of our distasteful rant? It’s all about discovering a world of ideas. It’s designed to make you think…to discard your prejudice about a subject and look at it from the ‘other side’. The ideas aren’t actually dwarf bowling, masochistic sex or offensive videos. They’re about rights, freedom of speech and the role of government.
Finance and economics is just one part of how we see the world differently to the mainstream. Being different gives us our edge over the mainstream media and finance industry. If you’d like to find out more about contrarian worldviews, then I suggest you attend this special event…
The Mises Seminar is Back!
‘Defending the Undefendable’ is a book by Walter Block. It inspired the topics of our controversial discussion above. The title of the book gives away the nature of the content. Walter tests his beliefs about freedom by applying them to the least favourable real world examples.
Do his beliefs hold up? And do your beliefs hold up to his arguments? You can find out in person, because Walter is coming to Sydney.
Our friend Benjamin Marks is assembling a collection of speakers who couldn’t get an invite to the politically correct Press Club. The impressive line-up will speak on the 1st and 2nd of December at the Establishment Ballroom in Sydney.
Topics up for discussion include: West Australian secession; who would build roads if the government didn’t; and Walter Block will defend the legality of blackmail, ticket scalping and the ‘male chauvinist pig’.
There’s also a particularly subversive and radical speech titled ‘Welcoming Remarks’. We can only guess what it will be about.
If you’re interested, you can find out more here. Speaking of ticket scalping, we’ll sell our ticket for $200.
That’s not all that’s happening in the world of ideas. Australian Small-Cap Investigator Kris Sayce is combining his ideas on how to make money with his very own philosophy of life in a new newsletter. After getting caught jay walking, Kris was inspired to make it free. The Pursuit of Happiness is nearing its launch, so keep your eyes open.
Your financial life isn’t just about finances. It’s also about how you feel about those finances. Most retirees feel like prey. They don’t understand financial markets, which means they feel like anything could be around the next corner.
The global financial crisis came out of the blue for them, and pulled their savings through the wringer. Meanwhile, their trusted advisors took what was left in fees and commissions.
All you have to do to change this story is get a bit of perspective. You don’t have to become a predator, just a wise observer from a lofty height. And the best way to get there is by finding a way of looking at the world which puts everything in a logical place.
The Mises Seminar, Pursuit of Happiness, and our other newsletters each have their own world view for doing that. They put into perspective what happened in the past, what’s happening now and what might happen in the future in a way that you can logically think about and feel comfortable with. And that is more valuable than a profitable trade.
Until next week,
Markets and Money Weekend Edition
From the Archives…
The Sharks Amongst the School
21-09-2012 – Greg Canavan
20-09-2012 – Greg Canavan
There’s Going To Be a Fight
19-09-2012 – Dan Denning
The World’s #1 Money Printer
18-09-2012 – Bill Bonner
The Video That Started All the Controversy
17-09-2012 – Dan Denning