The Financial Media,
Market Indexes and the 10 Year Treasury Bill
If you don't control your own thinking, someone else
will control it for you.
Neville Goddard
Neville Goddard
Price is a function of
supply and demand characteristics, which are often influenced by the news of
the day and short-term results. This has always been true, but is even more so
today with social media, the 24‑hour news cycle and all the information
available to investors. Value, on the other hand, is the net present value
of future cash flows based on assumptions for growth, discounted at an
appropriate interest rate. The Price of a publicly traded security is
often not the Value of it. The trading Price is known daily. Value takes
knowledge and experience to fully define, and is more often an art than an
exact science.
Bruce Flatt, CEO
of Brookfield
You encounter life with your
attention. Attention is awareness, mindfulness, and watchful consciousness. When millions of people focus their
attention upon listening to the same words, seeing the same pictures, and
hearing the same descriptions, tremendous energy is generated and a massive
thought-form is created (many bodies sustaining the same belief.)
The financial media wants to
capture your attention so they can expand their viewing audience and in doing
so, attract the attention of advertisers who will in turn pay them for the
privilege of obtaining access to that viewing audience. In this way the advertisers and the media both make money…at your
expense.
The media captures your attention by preying on your worst
fears by manipulating you into believing something that at its core is not
true. The following illustrates two
examples of misinformation involving interpreting market behaviour and interest
rates.
Market Indexes do not represent the market. Many of them are capitalization weighted meaning that
a handful of huge companies can move the whole index all by themselves. A much
better barometer of the health of the overall market is the momentum of market
breadth. Momentum of the market breadth
bottomed in late October and is currently higher now than it was then. In
other words the worst is over and its now time to go shopping the same way one
would when the supermarket is running a sale, only in this case many of the
stocks of public companies are for sale.
The last couple of months the media have been sounding
the alarm of rising interest rates, indicating that it is bad for the return of
stocks going forward. The risk free
rate I watch is the yield on the 10 Year Bill. When you get a chance go on the
net and take a look at a long term chart of the yield of the 10 Year Bill. You
will be shocked how low it is relative to its history. In other words the discount rate for a company’s
future cash flows is still very accommodative
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