Does "the market" make sense to you?

[Dave McClung]

The last two days have been filled with gloomy economic news, but all of the stock market indexes jumped more than 3% in two days. That is equal to almost half of the total increase this year. Does that make sense to you?

We are living in an upside down world.

There can only be one reason. Investors believe that bad economic news increases the chances that the Republicans will capture the house, senate and president positions. News that is good for President Obama causes the stock market to go down. News that is bad for President Obama causes the stock market to go up.

The news the first part of the week all related to the shooting in Colorado. That diverted attention from the economy -- good news for President Obama. The stock market fell. The last half of the week the economy was the news -- all bad news for President Obama. The stock market went back up.

[John Reilly]

The stock market seems to be an emotionally unstable entity. If it were to visit a psychiatrist, the doctor would put it on anti-depressants. It it were to visit a psychologist, the doctor would tell it not to be so sensitive to what others think of it. It is were to visit a Pastoral Counselor, the Pastor would offer to lead it through the sinners prayer.

[Craig Laughlin]

My (very) laymen's take on the stock market is that in the long run (years) it is very rational but in the short run (even up to a year or two) it is very irrational. Thus it makes sense to invest long term but to try and time the market is pretty much crazy.

Lately it seemed to me like it was responding more to news out of Europe and the fears about what might happen, but I don't pay a lot of attention. My life is much more tied to a little airplane company called Boeing and a couple of other little companies like Amazon and Microsoft. So keep buying those airplanes, if you can't do that be sure to upgrade to windows eight and always, always, always buy books from Amazon.

[Billy Cox]

The last two days have been filled with gloomy economic news, but all of the stock market indexes jumped more than 3% in two days. That is equal to almost half of the total increase this year. Does that make sense to you?

We are living in an upside down world.

There can only be one reason. Investors believe that bad economic news increases the chances that the Republicans will capture the house, senate and president positions. News that is good for President Obama causes the stock market to go down. News that is bad for President Obama causes the stock market to go up.

The news the first part of the week all related to the shooting in Colorado. That diverted attention from the economy -- good news for President Obama. The stock market fell. The last half of the week the economy was the news -- all bad news for President Obama. The stock market went back up.

It's an interesting theory. If Wall Street is the province of the rich and one presidential candidate has the interests of the rich very close to his heart (and offshore bank accounts), then it's reasonable that the market would have an inverse relationship to economic news. It should be interesting to watch.

[Marian Schwaller Carney]

While my money was sitting in a treasury fund, I was fine, almost smug, I confess, when it went down. Now I am better invested in stocks and etc. with my new advisor, I actually enjoyed it going up.

I think David's analysis is spot on.

[Jim Franklin]

Perhaps its instability is due to the nervousness of the business community because they cannot anticipate what direction it will go willing to hope for the best a GOP sweep but not hiring to prepare for the worst from such an incompetent directionalist adminiistration.

[Wilson Deaton]

Apparently, Obama is about the only thing influencing the market.


This is what I've heard...

• When the market is down, it's because Obama is President and he's bad for the economy.
• When the market is up, it's because Obama might lose the next election.
• When the market is stable it's because everyone is afraid to move until they know whether Obama will lose the election.

Perhaps I'm just an economic simpleton but I find it hard to believe all of these are true.

Wilson

[Hans Deventer]

I think it is very bad thing we are at the mercy of "the market" in the first place.

[Wes Smith]

Good morning Wilson, if you are still online! We had a rather significant rain and windstor, here. Neither my wife nor I, have been able to sleep. It is 1:18 AM here and the storm has died down. We'll probably crawl back into bed soon.

I have followed the market fairly intensely since the early 90's when we formed some investment clubs at McMinnville, OR, Church on the Hill, Church of the Nazarene.

One unique circumstance we watched was called the "dead cat bounce." Very simply (not saying that because I have vast knowledge and I'm trying to help folks understand, rather this is just the way my mind works.) a "dead cat bounce" occurs as a result of bad news accompanied by a temporary rise in the market, brought on by, I believe, market manipulators in an attempt to diminish their losses. Some key voice can drive the markets either way. The "dead cat bounce" happened many times during the late 90's and early 00's and again in the '05-06 major market adjustments. I was suckered in a few times, but learned to distrust the sentiments of influential people due to the fact that, imho, influential people in the street settings often give opinions just to bolster their own fortune or the large fortunes of groups of people for whom they were responsible.


The current good news in the current market is a "cultural dead cat bounce." Money is being printed at record rates and the fiddlers are fiddling and the Santas from Washington DC are running all over the country declaring and arguing all the wrong stuff. Folks, the end is near. Larry Burkett was right about the substance of his prophecies that the US will fold like a house of cards. He was just wrong about the timing.

If you are looking for hope, just look in the direction of the DC'ers who have had the guts to take off their Santa suits and put on work clothes, or to those who have recently gone to DC in work clothes. Insanity, by anyone's definition, has happened. The only way out is to place our trust in the folks who know the difference between "pay as you go" and "live on credit" and they choose the "pay as you go" and "pay off credit" route. The people I do not trust are the ones shouting, "The sky is not falling." It is, and so will the cat. It is just a matter of time.

Bearish Friend,

Wes

[Wes Smith]

And, Good Morning, Hans!

Friend,

Wes

[Hans Deventer]

And, Good Morning, Hans!

Good morning, Wes! Almost 10 am here.

[G R 'Scott' Cundiff]

Does the fact that millions of employees continue to pour money into the market through 401K's mitigate the market? It's not as though people say, "Here's a stock I think is going to do well, I think I'll buy some shares." Instead, we're dealing with fund managers who have millions and millions of dollars flowing in week after week, and who have to put it somewhere.

At least I think it happens that way. Does it?

[Dave McClung]

Does the fact that millions of employees continue to pour money into the market through 401K's mitigate the market? It's not as though people say, "Here's a stock I think is going to do well, I think I'll buy some shares." Instead, we're dealing with fund managers who have millions and millions of dollars flowing in week after week, and who have to put it somewhere.

At least I think it happens that way. Does it?

Yes it does, but many of them have stopped investing in stocks and have put their investments in fixed income investments.

[Dave McClung]

... Larry Burkett was right about the substance of his prophecies that the US will fold like a house of cards. He was just wrong about the timing. ...

Wes

Wes, when it comes to economics, if one is wrong about the timing, they are just wrong. It is that way with most things. Even a clock that is stopped is correct twice a day.

[Glenn Messer]

Saw a political cartoon last week. Some guys in business suits were involved in a crap game on a sidewalk on Wall St. One guy in a suit has stopped a lady walking down the sidewalk and says to her, "For a few dollars I can place a bet for you."

[Wes Smith]

Assuming that something catastrophic happens (that is my personal working assumption), what happens to cash in the bank, stocks, mutual funds, etc.?

It would be catastrophic, imho, if the President had to say something like, "Folks, we are cutting back on payments to folks on social security. Folks, we cannot pay the full amount to those receiving welfare checks. We are releasing 100,000 people from military service as we can no longer afford to pay them. No one will lend us the 40% of our budget we cannot raise on our own, so 40% cuts across the board."

Not trying to make a political point at all. Seems to me the writing is on the wall. Life is getting ready to take a dramatic turn for nearly everyone in the world. The only country that seems to be in good financial health is China and it can be argued that their health is not what it seems due to the fact that their creditors are all standing on corners with their pockets pulled out. Not sure what it means when the apparent strongest country calls in their debt and the folks owing the debt cannot pay. (Just had a chat this morning for an executive in a Dutch firm that builds solar equipment. He said their government has implemented regulations that make it nearly impossible to compete in the European scene. Further, he stated that the Chinese competitors do not have the Dutch regulatory restrictions and are taking turf by a storm and, further, that the Chinese government has invest 200 BILLION dollars into the solar industry in China.)

The question that has been bothering me for a long time is, what is the legitimate currency going to be when the dollar is devalued (an assumption, I know) to the point where our buying power is insignificant and prices are beyond imagination?

Are the Mormons right in storing essential foods? Would it be good to have a stash of gold/silver? How does the average person survive the coming financial storm (another assumption, I know)?

Friend,

Wes

[Wes Smith]

Wes, when it comes to economics, if one is wrong about the timing, they are just wrong. It is that way with most things. Even a clock that is stopped is correct twice a day.

Dave,

I'll take your word for that and I hope like crazy you are right.

But, what if you are wrong and Burkett was right, but he was wrong simply in timing because the Country was able to print enough and borrow enough money to put off the inevitable for a few years?

My sentiment is increasingly leaning in the direction of...have a plan folks. Soon. Do not put off another day in preparing for a very uncertain future. Just this week I heard a discussion among some trustworthy folks over what they were calling "Farmageddon." Their premise is that food will be the legitimate currency for the foreseeable future.

Just exercising my gift of encouragement!

Friend,

Wes

[Kevin Rector]

To Dave's original question, I generally disregard any explanation given by anyone about why the market has done what is has done over the last day, weeks, or months. The market can only be reasonably assessed over long periods of time and as a historical issue. So when the news caster says, "stocks are up today on new that..." I say, "bologna". The reason stocks were up today is that in general people were willing to buy at a higher rate, and others were willing to sell at that rate. Why they were willing is a mystery to all.

[Doug Kitchen]

The last two days have been filled with gloomy economic news, but all of the stock market indexes jumped more than 3% in two days. That is equal to almost half of the total increase this year. Does that make sense to you?

We are living in an upside down world.

There can only be one reason. Investors believe that bad economic news increases the chances that the Republicans will capture the house, senate and president positions. News that is good for President Obama causes the stock market to go down. News that is bad for President Obama causes the stock market to go up.

The news the first part of the week all related to the shooting in Colorado. That diverted attention from the economy -- good news for President Obama. The stock market fell. The last half of the week the economy was the news -- all bad news for President Obama. The stock market went back up.

I think that historically the stock market rises more often during democratic administrations than republican. I think you will see substantial effects closer to the election (probably downward if it is a close election). Immediately after the election the markets should go up a bit because uncertainty will have gone down. If the polls are suggesting a landslide/electoral certainty then the markets will probably bump up a bit (regardless who is ahead) before the election - removing uncertainty is generally positive for business allowing companies to react, adjust, make plans. The fiscal cliff in the US should be troubling businesses and the house and senate races will also affect what will happen in the lame duck session (do the losers stick the winners with an economic meltdown in 2013/2014?)

My take is that the US market is a safe haven in comparison to the rest of the world. Economic troubles are ahead for China and other emerging markets. Europe is definitely in trouble.

Additionally, the market appears to have factored in the worst news already, so if the news is only "bad" (not terrible) the market goes up a bit. Recently, more bad news, european uncertainty, etc needed to be factored in. Waiting for the other shoe to drop drags a market down - especially when your upstairs neighbor is imelda marcos.

There is also a supply and demand issue: when people are thinking about Colorado they are not thinking about buying or selling stocks. August is frequently a good time for vacations (esp in Europe), therefore, fewer major shifts will take place.

I think the strangest market irony was last year when the US ratings went down, investors fled stocks and where did they go? - into T-bills which dropped interest rates. I think this was because people felt some economic jitters then fled stocks only to find out the safest place was the institution that had just been downgraded.

Some portions of the market are controlled by a small number of stocks - Apple's performance was a bit worse than expected and it is a significant portion of the market cap of the tech market - more importantly a leading indicator of high tech. Facebook doesn't seem to be really working out according to expectations. And if high tech isn't fundamentally strong then investors are left with a lot of bad choices.

With regard to 401k's, there is a lot of money going in but increasing numbers of people are nearing retirement and those folks are moving to fixed income investments as they need the money. For people with a 10 year horizon this is a pretty good time to put money in stocks.

Doug

[Rich Schmidt]

To Dave's original question, I generally disregard any explanation given by anyone about why the market has done what is has done over the last day, weeks, or months. The market can only be reasonably assessed over long periods of time and as a historical issue. So when the news caster says, "stocks are up today on new that..." I say, "bologna". The reason stocks were up today is that in general people were willing to buy at a higher rate, and others were willing to sell at that rate. Why they were willing is a mystery to all.

This.

The explanations are just guesses. Nobody knows.

[Wes Smith]

Seems simplistic to me to say that the stock market cannot be tied to specific events and only understood over long periods of time and as a historical issue. Perhaps that is one interpretation, but it seems legitimate to say that the stocks were down today because of the oil spill, or sunami, or threat of default in Greece, or IBM missed earnings predictions, etc., or up today because a strike was averted, or IBM came in over earnings predictions, or news that Greece has come up with the capacity to fund another week of entitlements, or the pipeline through Nebraska has been approved, etc. Who waits a couple years or more to look back at a particular day and make comments based on historical perspective?

Market timing is not generally looked upon as being a good thing to do, but at the end of the day it is generally pretty easy to look back and explain buyer/seller sentiment based on events of the day.

Long term trends, I agree, are obviously best understood over time. Duh. (Meant to be reflective of my sentence, not what anyone else has said!)

Friend,

Wes

[John Kennedy]

Long term trends, I agree, are obviously best understood over time.
Friend,

Wes

You mean, it takes time to understand long term trends? Gee, what a concept!

[Wes Smith]

You mean, it takes time to understand long term trends? Gee, what a concept!

Took someone with a South Dakota background to figure that out.

Friend,

Wes

[John Kennedy]

Took someone with a South Dakota background to figure that out.

Friend,

Wes

The long winters provide one with an opportunity for reflection (if you're in SD - in ND they use the time to come up with bizarre roadside attractions such as the big buffalo in Jamestown or the huge black and white cow on a hilltop west of Mandan).

[G R 'Scott' Cundiff]

The last two days have been filled with gloomy economic news, but all of the stock market indexes jumped more than 3% in two days. That is equal to almost half of the total increase this year. Does that make sense to you?

We are living in an upside down world.

There can only be one reason. Investors believe that bad economic news increases the chances that the Republicans will capture the house, senate and president positions. News that is good for President Obama causes the stock market to go down. News that is bad for President Obama causes the stock market to go up.

The news the first part of the week all related to the shooting in Colorado. That diverted attention from the economy -- good news for President Obama. The stock market fell. The last half of the week the economy was the news -- all bad news for President Obama. The stock market went back up.

Dave, it looks as if this CNBC reporter agrees with you. He says the same thing you say in this post: http://www.cnbc.com/id/48400076

[Dave McClung]

Dave, it looks as if this CNBC reporter agrees with you. He says the same thing you say in this post: http://www.cnbc.com/id/48400076

I saw that too. Do you think he reads NazNet?

[G R 'Scott' Cundiff]

I saw that too. Do you think he reads NazNet?

He would be wise to do so!

[Rich Schmidt]

Dave, it looks as if this CNBC reporter agrees with you. He says the same thing you say in this post: http://www.cnbc.com/id/48400076

My favorite quote from that article:

The markets, however, go by their own logic.

[John Reilly]

I saw that too. Do you think he reads NazNet?

NAZNET is CNBC's major news source!

[Rich Schmidt]

NAZNET is CNBC's major news source!

Or, you know, their source could be the Morgan Stanley strategist that the reporter quotes throughout the article. One of the two.