The No. 1 Reason You Should Buy Stocks Now
The Dynamic Wealth Report
September 10, 2010
by Corey Williams, Editor
Tired of the same old economic data?
It seems like all we hear about in the media is jobs and consumer
spending. But they don’t tell the whole story. And to be perfectly
honest, they’re wildly erratic and prone to huge revisions.
There’s a better solution.
It’s an economic indicator the Wall Street Journal calls "One of the
timeliest gauges of economic activity".
In fact, according to Bloomberg, growth in this indicator has an 82.4%
correlation with GDP growth. That’s a claim very few economic indicators
can make.
What’s the indicator nobody’s talking about?
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Trash… or more specifically, the number of train carloads of waste and
scrap.
Carl Riccadonna, a senior economist at Deutsche Bank Securities said,
“It’s sort of like measuring horse power by looking at the smoke coming
out of the tail pipe.”
In other words, increased economic activity generates more trash. As
disappointing as that is for conservationists, it’s the ugly truth. So
the more train carloads of trash we generate, the better the economy
looks.
Take a look at this chart.
The blue line tracks the 4-week moving average of carloads of waste and
scrap over the last year.
You can see it peaked early on in the 2nd quarter. Right at the same
time, the S&P 500 peaked and GDP growth projections were highest.
Clearly the economy went through a period of slowing growth from April
to July.
And it scared the pants off of investors. That’s to be expected. The
2008 market crash is still fresh in everyone’s mind.
But everything is changing. Over the last month, the number of carloads
of waste and scrap has started growing again.
This is a clear indication
economic activity is on the upswing.
The economy is improving and that’s great news for spending, jobs, and
consumer confidence.
You can throw all the double dip recession predictions out the window.
It’s just not going to happen.
Some investors will doubt the strength of the economy… But that’s ok.
I’m more concerned when the vast majority of people believe an asset
“can only go up from here”. Like we’re seeing in gold, bonds, and
Treasuries right now. Remember, investing
with the crowd has a long
history of ending badly. You need to invest
ahead of the crowd.
And based on the amount of trash we’re generating right now, economic
growth is accelerating again. It won’t be long before the crowd is
rushing back into stocks.
It’s time to buy stocks before the rest of the crowd does.
• Nokia (NOK) was upgraded by
RBC Capital Markets this week. They now have an outperform rating and a
$14 price target on the stock. The world's top mobile phone maker hired
Microsoft's Stephen Elop as CEO to lead a renewed effort to compete in
the smartphone market.
• Skechers USA (SKX) was downgraded to hold by
BB&T Capital Markets this week. The shoemaker is facing sluggish volume
trends, and more recently, the significant increase in Shape-ups
discounting over the Labor Day weekend.
• Jefferies started coverage on Anheuser-Busch InBev
(BUD) this week with a buy rating. The analyst said, "Unrivalled
management track record suggests upside to current $2.25bn cost saving
target and value creation through further M&A potential."
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