If You Believe the Market Reacts to Information
The bad news of the day is that about $5B ($5,000,000,000) more than previously believed went to buy goods made in China, Japan, non-major South and Central American countries, and other places outside the U.S. Per the Vampire Squid (tm Matt Taibbi), this should cause a revision to Q2 US GDP from 1.3% to 0.9%.
The good news of the day is that weekly unemployment claims were “only” 395,000. (Let’s ignore the detail that last week was originally reported as 398K—breaking the streak—but is now 402K.)
The net result, at least as of 2:00pm is that the major equity indices are up by at least 3.80% (DJIA). The early articles claim that was because of the “good” news.
And the scary thing is, they’re correct. In the 193 weeks since the recession started,* there have only been 39 where initial claims were below 395,000, and two (including the current, possibly-to-be-revised week) that were at that level.
But, especially as none of Harry Reid’s appointees to The Grand Ripoff appear to believe that Jobs would do more good for balancing the budget than the Super Commission, it appears that three-quarters of that August body will be working solely on the numerator, not the denominator, of the Debt/GDP ratio.
I think the market was insightful enough to recognize that there were 7000 people more than expected that didn’t have to close out their 401K plans.
Now I’m not typically a metrics kind of guy, but there is one measurement that I would like to see posted some place. The market is bouncing down and up like a yoyo. We’re supposed to believe that economic conditions are dirving the frenzy, but that doesn’t explain the frenetic wave like movements that are occuring. So what goes one way then goes another and with each of those waves of convoluted activity there is a winner and a loser. What I’d like to know is what side of the trade our mutual fund “advisors” generally find themselves (with our money, of course)? Are those astute managers making up each day’s loss when the market goes up on its way to another day of losses yet ahead? Or do the funds only take the loss while the traders for the hedge industry and the investment banks (all of which have trading desks for their own account) take the profits on both the ups and downs?
Mutual fund managers tend to be more buy and hold types. Typically they will turn over 30% of the portfolio a year. Usually it’s due to fundamental reasons or a stock hitting their price target to sell target, or their macro outlook changes at which point they buy “defensive” stocks so we only get nailed half as bad. The wisdom used to be don’t buy a fund that churns their portfolio because its a sign that they don’t know what they are doing.
I haven’t heard a whole lot of hedgies say they are successful day traders either. But maybe traders get bolder when they are in the warm confines of a big bank.
The new thing we have is algo driven robots, but their trading psychology is proprietary. Methinks we will just have to wait and find out what they are thinking.
http://astrofibo.blogspot.com/2011/08/sp500-sell-rallies-until-december-6.html
Some suggest it is the computers.
I think it is: another round of bailing out BAC and Citi might get trouble with the tea party or the libruls. As long as the bankers are all calvinsits the tea party is good with bailing them.
No new taxes, they kill jobs in India and China.
Quietly make a steep drop in the markets, refer to Oct 08 and Oct 87, hide the next round of the treasury and fed buying Mortgage Backed Securities.
Corporations are people we don’t want them harmed, the corporations that is a 150,000,000 citizens can pay in the future.
Don’t let it out no new taxes, budget needs balance by ripping off the poor and seniors, Boehner and Cantor are quiet about those economy wreckers at Freddie and Fannie buying a half billion (no discount) of BAC trash paper yeaterday.
And it looks like the Euro’s ECB will be “investing” in the same toilet paper the US treasury is, so never mind wall st armegeddon is avoided again on the backs of labor.
Cannot have deficits to pay back the SS trust!!!!!!!
That would be the explanation why the market should go more or less straight down.
It’s the part about alternating 500 point down days with 500 up days is what’s weird.
“it appears that three-quarters of that August body will be working solely on the numerator, not the denominator, of the Debt/GDP ratio.”
You mean that 1/4 of them will be paying attention to GDP? Well, that’s progress! 🙂