Wednesday, October 08, 2014

You can't make this stuff up

Today, the markets started off like just about every other day during the last 2 weeks.  Stocks were off 0.7% or so in the morning before the 11am "buy everything" programs kicked in.

This brought stocks back to even or so, heading into the release of the FOMC minutes.  Typically the release of Fed minutes is a relatively minor affair because the Fed does a good job telegraphing their game plan.

However, today a few things seemed to jump off the page - words like "the strong US dollar could threaten needed inflation" and "economic TURMOIL in Europe & Asia".  Yikes, that sounds scary and you might guess stocks would take that negatively......

And you couldn't be more wrong in the new normal.  The added volatility lately has been caused by concerns that the Fed (and their counterparts around the world) have no bullets left to fight weakness in the economies of the world.  Five plus years into the great recovery and here we sit with a fragile stock market bouncing around all-time highs but also needing reassurances that the Fed will come up with some way to support these record prices.

Stocks made up for all of yesterday's big sell-off in one massive run of panic buying.  I'm sticking with the thesis that a number of hedge funds struggled in the first 9 months of the year and they are attempting to make their bonus numbers in a short trading window.  This is now the second time in a week that stocks fell 2% and raced back up 2% the next day.  This kind of volatility is generally a signal of something important coming around the corner.  @DougKass seems to have the best philosophy right now - "buy the dips, and sell the rips".

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I loved this tongue in cheek observation from Marketwatch re: traders.  I've been saying for a couple of years that Wall Street moved to New Jersyey many years ago, but no one really noticed because all of the nightly images of guys in funny coats running around with ipads on the floor of the NYSE.  However, as the article points out, this is really just for show.  The bulk of the trading is now occurring in a climate controlled room in North Jersey.

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This story is exactly the kind of clickbait that makes Business Insider/Buzzfeed, etc, just insufferable at times.

China Overtakes US as World's Largest Economy!!!

However, this is based on the concept of purchasing power parity which is one of those wonky ideas that seems good in a classroom but is silly in practice.  Yes, a Big Mac may cost less in China and thus a dollar (or yuan) earned in China is worth more than a dollar in the US but there are so many more intangibles that need to be input into the equation.

In raw dollars, it appears as though the US economy is still $6 to $7 TRILLION larger than the Chinese economy, so no, China's economy (while growing impressively) has not overtaken the US.  Score one for the clickbait truth squad.

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Cheers!

(and again thanks for coming back to visit)

PS - leave me a comment or twoople me if you have a specific topic you'd like to see covered.

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