Breaking: Stock Market is Weird
Dow closes above 11,000 for first time since May after a decline in jobs boosts hopes of stimulus measures from the Fed.
I just got this Breaking News alert from CNN:
Dow closes above 11,000 for first time since May after a decline in jobs boosts hopes of stimulus measures from the Fed.
So, the fact that even more people are without work two years into a recession is good news? Because stock brokers are hoping for yet another stimulus measure from the Fed? Really?
And what, exactly, is the Fed going to do? Interest rates are practically zero as it is.
Er Jim, elsewhere I’ve suggested you get someone with some conservative with more understanding of economic fundamentals than Doug who really was weird over “da tunnel… and maybe you too. Nothing weird about the past month where the Dow is up about 10%. Most of the job losses were in the public sector (census etc) while the private sector continued to add, so although they weren’t stellar they were yet more confirmation of a receding chance of double dip as were the retail numbers yesterday. Alcoa turned in great numbers and metals along oil which went to $82 are not a bad predictor of rising industrial activity at home and abroad. Anticipation of some QE is a factor but it’s only one of many and indeed there’s a lot of scepticism about how effective pushing on the string will be. QE is having to be employed in default of any much more reliable fiscal stimulus which is being blocked by the Republicans. In short, despite Republican hopes, the economy is recovering naturally driven by recovering consumer spending, exports, house prices in patches, cheap money, etc. I personally would rather spend a trillion on buying new tunnels, highways, bridges etc than on purchasing long bonds but that’s the only shot in the locker because of a staggering amount of obtuseness out there which is basically politically driven.
“’ve suggested you get someone with some conservative with more understanding of economic fundamentals”
Oops that should have been
“I’ve suggested you get some conservative with more understanding of economic fundamentals”
It’s all about betting on the future. Investors are buying now because they see better times ahead, not what is happening now. They think that, with the Republicans taking over Congress, there will be total gridlock in the federal government and the market absolutely loves gridlock.
Patrick T. McGuire says:
Friday, October 8, 2010 at 17:02
“It’s all about betting on the future. Investors are buying now because they see better times ahead, not what is happening now.”
Actually they don’t. It’s a bit of both but mainly what’s happened already. I can assure you if the employment numbers, consumer spending number and a few other indicators had been junk over the past couple of months the Dow would not now be at 11,000. Gridlock has nothing to do with it outside of uniformed fantasies.
As I commented in the other thread, before I saw this one, equities become a hedge at some point. You buy them not because you believe in the underlying compaines’ near-term profits, but because you think other things (cash, bonds) will do worse.
If QE2 would drive up equities (by further driving down effective interest rates), which side of the bet do you want to be on?
See also Zero-Hedge coverate on “POMO” and their belief that this rally as been about government operations.
“As I commented in the other thread, before I saw this one, equities become a hedge at some point. You buy them not because you believe in the underlying compaines’ near-term profits, but because you think other things (cash, bonds) will do worse.”
If you think one asset class is going to perform worse than another then you rebalance of course. This doesn’t mean the outlook for corporate profitability isn’t actually quite good.
“See also Zero-Hedge coverate on “POMO” and their belief that this rally as been about government operations.”
A 10% rally because of govt operations? If you say so.
“See also Zero-Hedge coverate on “POMO” and their belief that this rally as been about government operations.”
btw I took a look at zero hedge….obviously technically very well informed but don’t you find the paranoia and hysteria just a little overdone? Ritholz on steroids?
I discount much of ZH, but worry that I shouldn’t discount all.
Yes, we steady retirees rebalance, but fund managers and other speculators jump.
John Personna says:
Friday, October 8, 2010 at 19:30
“Yes, we steady retirees rebalance, but fund managers and other speculators jump.”
One of my sons works for a asset manager, they are much more cautious than you might think.
“So, the fact that even more people are without work two years into a recession is good news? Because stock brokers are hoping for yet another stimulus measure from the Fed? Really?”
Well it tends to have a great effect on lowering wages which in turn can have a really positive effect on the markets and business in general.
How many times has the Dow reacted with glee on news of higher unemployment in the past quarter century? 10? 20? 50?
“How many times has the Dow reacted with glee on news of higher unemployment in the past quarter century? 10? 20? 50?”
Democrats are supposed to be rational. Don’t let the side down.