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The Media Infotainment Complex defined

what is wrong?

I am part of it, although I would not classify what I do as information or opinion that entertains. What I attempt to do is give you some perspective garnered over the past 6 decades to help you process the fire hose of opinion and commentary on the market. In many cases this commentary is not given with any historical context or, for that matter, any degree of real world experience or educational background. I try to separate the wheat from the chaff.

The “complex” includes television networks specifically any business or financial, plus any other network that presents comments on the economy or markets (regardless of how cursory), the internet (blogs, podcasts, financial websites). Particularly dangerous to consume as it pertains to economic opinion are networks and outlets with political axes to grind. Whatever they say is always designed to promote their ideological best interests, factual or not.

One other key point about the “complex” is that it is usually negative. Bad news sells. There are lots of reasons not to invest. Yes, we have experienced significant down markets. I’ve experienced a few in my career. When I got into the investment business in 1970 the Dow Jones Industrial Average was around 750. Last Friday the index closed at 38.239.66.

Good News/Bad News … Having it Both Ways

“Gross domestic product, a broad measure of goods and services produced in the January-through-March period, increased at a 1.6% annualized pace, below the 2.4% estimate.”(CNBC) Is this good news or bad news? Well, if you have been on the edge of your seat worrying about Fed policy not moving the needle as it pertains to slowing the economy to combat inflation, this is a significant miss indicating weakening. I perceive this to be good news. The economy is not as robust as previous numbers might suggest. This may be a sign that Fed policy to slow the economy may be working. It is a potential precursor of lower rates down the road. This news came after several weeks of the market obsessing in a negative way about the potential of “higher for longer.”

And now for the really bad news

“The personal consumption expenditures price index excluding food and energy increased 2.8% from a year ago in March, the same as in February, the Commerce Department reported Friday.” (CNBC) That was above the 2.7% estimate from the Dow Jones consensus.” So, the market was expecting a 2.7% increase (this was only 1/10 of 0ne percent miss). For a while the market had it both ways with Dow, S&P 500 and NASDAQ collapsing nearly 1.8%, 1.5% and 2.0% respectively. Lower than expected 3Q GDP (what I would call good news for the fear-the-Fed crowd) seems to have won the day as the market came back later in the session with all three indices closing positive for the week.

Stagflation

“The combination of high prices and slower growth set loose fears of stagflation to send markets tumbling.” (Barron’s) I forgot to add this twist to the worry soup above … the nasty word above from the late 70’s, “stagflation.” If that doesn’t get a short-selling computer altos humming nothing will. It just took two data points to spiral up this concern.

The set up for the coming week

The media infotainment complex (MIC) wants you to be concerned about the message out of this coming Wednesday’s Fed meeting and the potential for nasty news on the employment front on Friday. I hate to predict but I will step out on the ledge and predict the Fed’s message will remain “higher for longer” and good employment numbers will be viewed as a curse (not by those finding work) by those looking for lower (seemingly not necessary) rates. A 4.5% to 5% 10-year treasury with 5% plus fed fund may be the new normal. I have seen much, much higher rates in my career and we have survived them and thrived. There may be a time to cut rates in the future but right now may not be it.

What’s your take?

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