One of the more sensitive topics of the day, I continue to research articles about the global warming debate and try to keep an open mind. As a long term planner and one concerned about the environment, this topic is of great interest to me. I recently came across this article by Matt Ridley, an author who has been following the global warming debate for almost 30 years. This long and well researched article reviews the current studies and positions of various organizations on global warming and the impact of increased CO2 levels and whether this is really harmful. If you can make it to the end, he suggests what the cost of debating this global warming issue may really have been to people, our environment and our economy.
Link to article: CLICK HERE
There is one tool constantly discussed and reported on in the financial press that you may be surprised actually doesn’t work all that well when it comes to long term investing It’s called economic forecasting.
John Kenneth Galbraith was a Harvard economist that after years of study concluded, “The only function of economic forecasting is to make astrology look respectable.”
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I typically comment on the performance of the S&P500 – a US stock market index that represents 500 US stocks of various industries and revenue size. Given the US is the largest single economy in the world, its proximity to Canada, the global nature of most of its industries and its stock market depth and breadth – it’s a pretty good indicator of the overall stock market. The US election results not-withstanding, there is an interesting trend worth noting.
As noted by First Trust analyst Bob Carey: from June 20th, 2014 to February 11th, 2016, the price of a barrel of crude oil went from $107.26 to $26.21 – a drop of 75.6%. The result was 2015 was the worst year for S&P 500 earnings since the financial crisis of 2008. This earnings recession continued to the first quarter of 2016.
From Febryary 11th to the end of Sept, oil gained 84.1% rising to $48.24 – ending the S&P 500 earnings recession.
The media have been all over this earnings recession ( shall we call it a pause?) inciting continued fear of this bull market. Take no heed – this market has some room to run.
The 3rd quarter earnings should be out soon but the estimates from the Bloomberg chart will be pretty close. But look at next years estimates – notice something? If these estimates are anywhere close to reality, they should be a record number for earnings.