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The Worm Starts to Turn

ADDENDUM: Blog Addendum—How revealing is the news behind Tuesday's CNN headline after Wall Street's rebound from recent market declines—“Stocks higher on weaker GDP data—hopes rise that interest rates stay low.” Is this investing turned on its head? We used to buy shares in companies based on their prospects for increased earnings from sound business models. Here we get more news that reinforces views about relative weakness in the underlying economy and that sends markets into buy mode, because the government will keep printing more money and provide cheap financing, which helps trading spreads and CFO balance sheet manipulations. Unfortunately, real estate investors need increased GDP to spur office leasing and retail sales for higher shopping center returns. In that vein, the announcement from big law firm Weil Gotshal should not be welcome news to office brokers. Weil announced layoffs of associates and compensation reductions for some partners, probably a harbinger of more thinning to come among the professional ranks where firms cannot command the same level of fees from corporate clients they once did. That gives Bernanke and friends more prodding to be cautious and keep rates low. It's just another buy signal, right? As noted below: the U.S economy is certainly no great shakes, but China deserves our special concern…

By Jonathan D. Miller | Updated on June 24, 2013

Blog Addendum—How revealing is the news behind Tuesday’s CNN headline after Wall Street’s rebound from recent market declines—“Stocks higher on weaker GDP data—hopes rise that interest rates stay low.” Is this investing turned on its head?  We used to buy shares in companies based on their prospects for increased earnings from sound business models. Here we get more news that reinforces views about relative weakness in the underlying economy and that sends markets into buy mode, because the government will keep printing more money and provide cheap financing, which helps trading spreads and CFO balance sheet manipulations.

Unfortunately, real estate investors need increased GDP to spur office leasing and retail sales for higher shopping center returns. In that vein, the announcement from big law firm Weil Gotshal should not be welcome news to office brokers. Weil announced layoffs of associates and compensation reductions for some partners, probably a harbinger of more thinning to come among the professional ranks where firms cannot command the same level of fees from corporate clients they once did. That gives Bernanke and friends more prodding to be cautious and keep rates low. It’s just another buy signal, right?

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