I don’t know about you, but I’m getting tired of the daily barrage of economic reports.

It’s Monday and the Purchasing Manager’s Index is up – great. Oh! Sorry, it’s now Tuesday and Housing Starts are
disappointing. Wednesday, Consumer Sales numbers are lousy but that’s good news because things are not as bad as we thought they would be. Thursday, inflation is low but, oh no, maybe it’s too low. Friday, European Banks are on the verge of collapse, for the 5 th time. Saturday, thank God it’s the weekend and no one reports.

…

European Contagion. I think I have already caught it. The symptoms include insomnia, fits of anxiety,
outrage and unrepeatable character assassinations of most of the inept politicians. But the most severe
symptom is the brain throbbing confusion over the conflicting proposals that are saturated with self
interests even from within the same country.

…

So let’s get on with it already. Greece is broke and playing charades with their debt and pretending that
they will pay it off. It isn’t fooling anyone. The only advantage is to defer the reckoning and possibly
dampen the impact until the European banks are in better financial shape. Otherwise, this appears to
be throwing more good money after bad. Imagine what could be accomplished if the Europeans faced
up to the realities of their overleveraged governments and directed additional funds towards productive
purposes.

In the meantime, while we’re all looking across the Atlantic, maybe we should pay attention to what’s
happening on the other side of the Pacific. If there is one thing that everyone is in agreement, it is that
China is the growth engine for the world. We occasionally debate the rate of growth, but very few doubt
the ability of the Chinese government to sustain its economic progress.

The unknown, unknowns ganged up on us last quarter but the market remained remarkably resilient.

Uprisings in the Middle East, so what? Earthquakes in Japan, that’s unfortunate. More Sovereign Debt problems in Europe, been there, done that.

So what’s it going to take to set this market back? Well, I’ve got a list that I will share with you in a minute. But let’s start with why this market is so strong, and in my opinion it can be summed up in a word. Liquidity.

There’s simply a lot of money around that has to go someplace and right now its favourite destination is the
stock market.

Staying focused on this one issue has helped us avoid all of the “noise” we hear daily and it explains why the
market didn’t perform poorly in the face of several negative headlines.

Bill Miller is a well known Mutual Fund Manager for Legg Mason. For 15 straight years his funds beat the S&P
500 index, ranking him as one of the top money managers in the United States. He had an expression: “If it’s in
the press, it’s in the price.” In other words, what is commonly known or anticipated has already been
discounted and factored into the market. So, consensus thinking isn’t much help when it comes to
outperforming the market or more importantly, staying out of trouble. Remember the technology stock bubble
in 2000, the New Economy and the for-sure winners of the future like Nortel?

…