Wow, look at that! A big upside in the markets! Are the traders wrong or is the media just gunning with the wrong story? Do you really believe the markets should be up on hype about companies buying more computer infrastructure? What does that have to do with the bottom line for companies other than computer manufacturers? Something isn’t right here.
Business owners already know that gross, margin, and net are the only things that matter when evaluating whether a company is doing well or not. At the beginning of the day we all know that you have to make a profit or nothing matters.
We have the news media telling us computer purchases are a reason to buy stocks. Those computers are a commodity expense only and have nothing to do with earnings in the end, unless properly utilized. If these companies were buying more pencils would we hear about it? Would we say they are going to write more info on paper faster and thus the economy will get better? We are at a point when companies need to upgrade hardware to keep up with software. It isn’t an economic expansion event.
Reality is, if they are not investing in humans but are investing in technology you can bet the future is a lower standard of living for the population and a higher standard of technology and efficiency for companies.
There is no reason to drive the markets up on this news. We have increasing taxes, increasing government debt, fewer jobs… you get the picture? The markets should only rise if the economy is rising, the standard of living is increasing, and profitability is realistic.
Do you buy computers because you expect sales to increase or do you buy them to increase your efficiency and keep up with software? Maybe the best investors are business owners.