Noun   

    1.    bellwether - someone who assumes leadership of a movement or activity
                         
    2.    bellwether - sheep that leads the herd often wearing a bell
                             (wether - male sheep especially a castrated one)


Certainly IBM is one of the companies which everyone expects to provide some direction for the economy as a whole. With an enormous global reach and with so many other major businesses depending on IBM for their IT needs - quite often "bet the business" IT needs, it is no wonder that IBM's Q4 earnings were of great interest to the market. Buried within them were signs of an increase in revenues (IBM's revenues had been flat to declining for a long time) and an increase in the numbers of long-term service contracts signed. Although Revenues grew 7.5% in the 4th Quarter it wasn't so spectacular after currency fluctuations were taken into account, clocking in at 4%.

Neverthless any sign of revenue growth at IBM  is good news because if major businesses are getting their checkbooks out for significant IT purchases, it shows confidence in the economy and a willingess to spend money to invest in business or in improving business efficiency.

There is an important distinction to be made between Business spending and Consumer spending. Consumer Spending seems to be a very closely watched metric - almost obsessively so, but Business spending is probably far more important. Without Business spending, there would be no consumer spending!

Over the last few years, earnings improvements for many companies (IBM included) have seemingly been due in part to cost-cutting. Could it be that companies are starting to move from a cost-cutting stance at last and the economy is about to heat up another level? Watch IBM to find out.

If IBM revenues continue to grow, see definition 1 above, and expect the economy as a whole to grow with it.

If IBM revenues falter, then see definition 2 above and expect a lot of aimless sheep-like plodding around with very little testosterone.

What's all this got to do with value investing? Knowing where the economy as a whole might be headed can give us some pointers to hold on to any stocks that have started plodding or to start selling them in anticipation of finding future bargains. We need our bellwether stocks like IBM to act as a barometer.