Investing and the Weather Spring

I hope you are enjoying the warmer winter weather. Having temperature above freezing sure does lift spirits. This newsletter is the first one in a series comparing spring time weather and spring time in the economic business cycle. A normal economic business cycle lasts between 5-8 years.

Spring is defined as a 3 month period on the calendar while actual springtime weather has a lot of variability. Spring time weather is when temperatures warm, plants return to life, animals reappear, etc. It is common to have frost and snow even once spring time weather has started. In fact, some major snowfalls do occur during spring and while it is an inconvenience it is still spring time.

Spring in the economic business cycle starts when the Federal Reserve states that the economy has stabilized and is starting to grow again. Interest rates are relatively low as the Federal Reserve is trying to get the economy at a 3% growth rate, their stated policy. Employment will start to improve as companies start to grow again. Interest rates will stay low for as long as it takes to get economic growth that creates jobs. It is a period of economic transition.

The economic spring does not have a defined time period and is more on the magnitude of a year instead of 3 months and it tends to last longer than winter. Stock markets rise around the globe in a jagged fashion just like the weather. In fact it is possible to have the stock market drop that gets people's attention just like a snow during spring.

The economic spring ends when the Federal Reserve states that the economy has returned to "normal" whatever they thing that the term means. Interest rates rise during spring as things improve.

Watching short term and long term interest rates is key in business cycle investing. Last week, I stated that because of jobs data long term interest rates would come down during the week and that the current bond funds should be maintained as we are early in the spring season. Indeed long term rates did come down during the week making this a good decision for now.

SPRING FACTS:

In the eastern United States, Spring weather travels northward at a rate of about 13 miles (20 km) per day.

The lifetime of a typical small cumulus cloud is 10 to 15 minutes.

A small, fluffy cumulus cloud may hold 100 to 1000 tons of liquid water.

More than just gentle showers: Under an average annual rainfall of 700 mm, the total impact energy of raindrops hitting the ground can be as much as 4000 tons of TNT.

God Bless you and your families. God Bless the people of Haiti and those who are working diligently in this situation.

Investing and the Weather

I hope you are all staying warm and safe during this very brutal cold weather. At the end, are some It's so cold jokes for your amusement.

This week was excellent for all of the accounts. It is good to see the year start so well.

The most important story of the past week, that has the biggest impact on investing decisions, was the job loss number for December. Instead of showing a job gain the result was a job loss. This is the most significant data because it guides the interest rate decision for the Federal Reserve, who will maintain the current low rates for awhile, and will put a ceiling on long-term interest rates for now. Because of this data, the current bond funds will be maintained for now.

Business Cycle Investing is like the weather in that both have 4 seasons and different actions are needed for each season. This brutal cold weather resembles the great recession that we have endured. We are investing like it is spring. Yes spring will arrive in a few months.

It's so cold that:

you light a candle and the flame freezes
your shadow freezes to the sidewalk
you have to break the smoke off your chimney
you have to open the fridge to heat the house
It was so cold the lawyers had their hands in their own pockets....
I'm shivering like a mobster in a tax office.

Stay warm and think of spring!!!!!