The PMI is calculated by asking a fixed number of purchasing managers in a variety of companies whether they expect market conditions to improve, deteriorate or stay the same. Their answers are digested and out comes a number. If it is higher than 50 then it shows that a majority of those managers expect an improvement and da di da di you can guess the rest. The theory is that sitting in the purchasing chair of the company this group of people have the clearest idea of how the real economy is moving.
So what happened? The index fell and now more than half the respondents say that things in the economy are getting worse. "Whoopee!" says the stock market and up it shoots. 'Why should it do that?' you ask yourselves. It's all because of QE (Quantitative Easing). If the economy is weakening then the Federal Reserve will postpone the planned tapering of output by the money printing machine. More free money and more inflation of stock prices.
It looks as though there will be a bit of follow through of the increase in the index today. But I remain comfortable, for the time being, holding no shares. I will be miserable if the market continues upward and I
A friend asked me where my second picture in yesterday's blog came from. (The first was the very last scene of Some Like it Hot.) The second came from Gold Diggers of 1933, one of my all time favourte films. Have a look at this clip. Wait for the advert to end, sit through the credits, and you will be treated to Ginger Rogers as you have never seen her before. You'll also see an early Busby Berkeley sequence. Loads of girls, lots of teeth, lots of legs.
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