"The better things get, the more nervous you should be " by: John Sample

   Another weak start to the trading week.  
   This falls after last Friday’s drop in various averages and indexes moving the trading week into negative territory.  
   There are multiple reasons such as dropping interest rates, inflation and the delta variant.  
   Of course there is the fact that we continue to push new record high levels and profits are being taken.   
   The real interest is that there will be something that does cause a correction or even a bear market that will end up being referred to as unexpected.  
   While I find it difficult to invest any significant amount at market highs, it is really hard to disregard the earnings reports that are coming out.  
   Last week the financial sector reported earnings which were significantly greater than expected.  
   This week we will have companies like Coca Cola and Johnson & Johnson.  
   These large old lines major corporations are an excellent reflections of the economy.    
   Of course there are the numerous news items that has to give investors pause for reflection.   
   We have the rise of infections from the Delta variant of COVID.   
   You don’t have to possess a photographic memory to acknowledge the impact the pandemic had on a very robust U.S. and worldwide economy.   
   There is hardly a news feed that doesn’t mention some new endeavor by China that undermines the economies of Western countries to benefit China.  
   While we currently seem to be in little or no mood to confront those who promote terrorism, it is not going away.  
   If that isn’t enough, the western part of the U.S. is experiencing one of the worst droughts in over a thousand years.   
   Beyond the loss to fires, think of the impact on the food chain from losses of vegetable and fruit production.  
   Whether you are a believer or not in climate change, the drop in flow of the Colorado River, which sustains Las Vegas, Phoenix, San Diego and Los Angles, could and will prove significant.  
   This is investing in a nutshell. You try to define trends before they become standards.  
   You get in early and keep a diligent eye on conditions in the economy that could stall growth.  
   That is why earnings reports are so important.  
   Not for what they did in the past, but for what they expect six to nine months down the road. Crystal ball gazing by any other name.

 

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