We lose 95,000 jobs and the stock market goes UP because (get ready for the Ivy League Idiot-speak)...
"it will prompt the Federal Reserve to spur economic growth."
Because as we all know economic growth doesn't come from industrious individuals, innovative creators and inventors, hard work or the desire to pursue life, liberty and happiness.
No, it comes from the "Magical Federal Reserve Fairies" who just waive their magic wands and then POOF! Economic growth!
Why, it's so simple, why didn't we think of this before! The federal reserve will just "spur economic growth!"
Of course, you morons out there who aren't Ivy League economists like Paul Krugman or Wall Street gurus like Dick Fuld are too stupid to understand how this all works. But thankfully you have us in charge to "spur economic growth."
Pour yourself a martini and enjoy the decline.
Have to admit, this was the big thing I never understood about the stock market... Horrible news = rising market? I guess as an Engineer, I wouldn't understand the math behind this...
ReplyDeleteso Captain...
ReplyDeleteI've hedged a crapload of my retirement egg in cash 'cuz not a few were saying the Dow is going for a tumble.
Now I'm thinking if November 3 turns out anything like the tea leaves are landing, 12,000 won't be far behind. When do I get back in?
That reminds me of the thinking behind the business plan of South Park's Underwear Gnomes
ReplyDeleteStep 1: stockpile stolen underwear
Step 2: ....
Step 3: Make millions
Now, where did I put that martini glass ...
Markets move according to human emotions, mainly greed and fear. Almost all those type of market comments are complete BS. That is why most people (myself included) watch CNBC with the mute button activated.
ReplyDeleteThe media always seem to portray the Federal Reserve, as having some sort of magical power. In fact a large growth period of the US economy, there was no central bank in the USA.
Thomas Jefferson was aware of the dangers of a central bank diluting the money supply. It looks like his worst central bank nightmare, has come to fruition.
While every dollar gained on the market is worth incrementally less than the last. In terms of gold, the market is still down, but hey, it's a bigger number right?
ReplyDeleteThese guys are all about big numbers and need to have the market numbers up going into the election.
At some point it's all going to get thrown back at them and they are going to blame "the market" that EVIL EVIL market.
As a general rule, don't try to explain simple things to people when there are people who have an interest on making them "Complicated" and misleading people. In many areas of economics this is a problem but my favourite example is weight loss ...
ReplyDeleteEvery time you see someone write an article or comment on weight loss they spend half of their words demonizing certain "bad foods" as being the root of obesity. Its McDonalds fault, or it is the fault of Soda companies, or people are fat because they eat chocolate. The reality is very simple, certain foods don't make people overweight an excessive intake of calories makes people overweight. Effectively, you can eat anything you want and (as long as it is well portioned and fits into your daily caloric intake) not gain weight.
The reason I bring this up is a simplified argument I use to describe what the federal reserve does is as follows. There are two forms of economic growth, real economic growth and simulated economic growth. Real economic growth is driven by the creation of a new product or service that people will gladly pay for, or the development of a new technology or methodology that increases productivity; real economic growth is very stable and secure because there is a fundamental need for what drives it. Simulated economic growth is driven by the expansion of money, and this increase in money encourages speculative investment which is (effectively) the assumption that there will be demand for a product, service or technology in the future.
To a certain extent, you need both real and simulated growth because some times the speculators are correct and their investments do lead to actual economic growth. Unfortunately, when you have excessive liquidity in the market speculation becomes the dominant force and a disproportionate amount of the resources in the economy are centered on the production of products and services with no real market and little chance of developing a market. With the eventual return to reality the economy is weaker because of the "fake" jobs lost along with the "real" jobs that were never created. A good example of this is the housing bubble because the excess liquidity produced countless jobs within housing related fields that isn't justified by any real demand, and when the market collapsed people lost these jobs; and had this liquidity never existed these individuals would have (most likely) worked in fields which were not related to the housing market, and wouldn't have been impacted by any downturn in the market.
Unfortunately, most people are not interested in real economic growth and don't care whether their job is of any real value as long as they're paid.
Before the "great FED inflation" would the Krone be a good place for cash?
ReplyDeleteRight, so what can the Federal Reserve do to spur economic growth?
ReplyDeleteThey can't increase the money supply, because there is a glut of capital and virtually no demand for it.
They can't lower interest rates, because they're already at record lows.
So what can the "Magical Federal Reserve Fairies" do? Imagine Cupid without any arrows in his quiver...
I think a lot of the rise is due to polling data that indicates the Republican will win big in November. That means at the minimum that businesses can stop worrying about new anti-business legislation and at best means that some of the horrible legislation passed over the last two years will get rolled back. Even if nothing gets repealed before 2012 a lot can get defunded.
ReplyDeleteIn a sense, it is like the hurricane winds flag is being replaced by a tropical storm winds flag.
The stock market looks ahead six months to a year. Except in very unusual conditions -- like when real estate and bonds are so bad your only choice to place capital is in stocks -- the stock market is generally a leading indicator of economic health. Investors are looking beyond the bad news.
OTOH, if the Republican wave is small in Nov, expect another stock market crash.
The market is driven by a technical component and a psychological component.
ReplyDeleteShiller's CAPE (cyclically adjusted price/earnings ratio) and Tobin's q as as 2Q indicated the market as a whole was 48% over-valued. The larger the amount of over-value (or under value), the more the psychological component is dominant.
Unfortunately, I haven't been able to find a free source for CAPE and Tobin's q, so I can't tell you what it indicates now.
Personally, I think the market is on a over-valued bubble (based on a severe case of wishful thinking and wholly unjustified optimism) and a correction of 20% (maybe more) could happen at any time. All it takes is some event to pop the bubble.
Please do not construe this opinion investment advice - I'm just an idiot trying to figure out what I should do with my money.
Peppermint Panda, Captain,
ReplyDeleteThanks for simple explanations past, present and future. I don't really understand a lot of what's going on but my instincts are good and I can tell that the baloney I'm being fed isn't prime rib! I always figure that "it's complicated" means either 1)This person doesn't know any more or possibly even less than I do, or 2)He is a schyster trying to keep me in the dark so that he can screw me.
From what I glean from various sources I am preparing for hyper-inflation in the only way I can. I can't afford to go out and buy gold. Maybe I'll buy some silver. But what I can afford is to stock up on none perishable food items and have been doing so a little at a time for the past year. At least we'll be able to eat for a while. At best, instead of needing to spend our entire $150,000 paycheck (assuming we still have our jobs) in any given week on a few can of beans, some crackers and a bag of apples, we'll pay off our mortgage with the worthless pieces of paper. Maybe prepay our property taxes for several years. And then at least we'll have a place to live.
I'm not George Soros, (nor would I want to be - he's on the road perdition!) so I'm not in a position to profit greatly from the ruin of 98% of humanity (nor would I want to). I'm just looking for survival.
to be fair, this is probably some analyst pulling an explanation out of his @$$. the stock market goes up, with little external data to explain why, so lets make something up.
ReplyDeleteYou would think that the current "Magical Federal Reserve Fairies" and the President's Council of Economic Advisers would look seriously into what FDR's "Brain Trust" did and NOT do what they did.
ReplyDeleteWe have the very same arrogance in charge now that was in charge then. They seized power, increased regulation, raised taxes, enabled labor unions to run rough shod over businesses and declared war on the "rich", prolonging the depression.
The question is "are the "smart people" who are running the show now capable of fixing it?"
I don't think so.