Anyone Else Notice This?
By Shaun Kenney | Friday, August 12th, 2011 | PolicyStocks are actually up on the week.
Goes to show you that prolonged worry will decimate markets, while simply letting things fail and correct can improve a market economy without all the hassle of stimulus, qualitative easing, and speculation.
Tags:
Contribute for Conservatism!
Share this post
About the author
Shaun Kenney
Shaun Kenney is the Chairman of the Fluvanna County Board of Supervisors, former Communications Director for the Republican Party of Virginia, and an active blogger since 2002. Shaun lives in Thomas Jefferson's backyard with his wife, six children, and a modest attempt at a farm in Kents Store, Virginia.
Comments
11 Responses to "Anyone Else Notice This?"
While I agree with the general sentiment, stock price fluctuations are not a great peg to hang things on.
You could have noted that we had stock market crashes in 1987 and 2000. Armageddon did not follow. We had a major financial crisis in 1990 with the savings and loans industry. Instead of taking advantage of a crisis, the government set up a Resolution Trust Corporation and handled the problem more or less out of sight. The one case where the government meddled and meddled was the Great Depression of the 1930s. Except for the second case Now.
I’d agree that the stock market isn’t a great litmus test for how things are going. Too emotion driven. If you look at the roller coaster ride between last week and today, it’s hard to pair the market’s reactions with any rational reasons. The best example of that would be the downgrading of U.S. Treasuries leading to a rush out of stocks and INTO U.S. Treasuries.
At least this has thrown some cold water on the oil speculators for the time being…
And your point is? The market is still off about 12% from its highs, and from the way it sounds, the super committee is unlikely to be able to agree on the long term plan that will be required to get the debt and deficit under control. So what happens the last week of the holiday season? Will failure to agree on a plan like the one Boehner and the President almost agreed to stimulate another sell off? Frankly, it is not that hard, we know what has to be done if the parties seek a balanced approach of cuts, revenues, and reform, and also, take action on the legislative agenda the President has proposed to stimulate job creation.
TimJ: Yeah. Unfortunately, it always seem like gasoline prices fall slower in reaction to a drop in oil prices than they rise in reaction to an increase in oil prices. Price has been dropping for a week, it’s hardly noticeable at the pump. When the prices goes up for a week the pump price shoots up.
Commodities speculators can kiss off… that includes the inflated prices of oil, corn, gold, etc.
Eerily enough, it sounds as if now that the shoe has dropped and the “super-dooper-Congress” is moving ever so slowly forward, that the market is reacting (gulp!) positively to the news.
What still worries me at the macro level is when the banks et al. start unloading their capital.
The resulting inflation coming out of this recession is going to be hard core… unless, of course, they engineer a very slow return to prosperity to allow the economy to grow into all that printed capital.
Mixed messages, but the messages for the US of A don’t seem so bad after all. Short term, consumer confidence needs to jump… that’s what’s holding things back at this stage.
Shaun: Agree. It would be good if we could get some more capital into consumer’s hands, that would help. Maye extend the payroll tax cut. As of course would more jobs.
Those darn consumers. They have an unemployment check waiting for them – the greatest stimulus of all*. No job needed**. So why would they be waiting for anything, especially from their super duper Congress? Well maybe they are waiting for Bernanke to print them a million dollars instead of sending it to foreign banks. Forget that stupid “payroll taxcut”.
*Footnote 1 According to the WH and DNC
**Footnote 2 According to Nancy Pelosi since they have free everything now
Steve,
What in the devil would consumers do with capital (or were you being facetious)?
All,
Fed officials have written and spoken extensively about “the wealth effect,” the notion that higher stock prices translate into higher consumer confidence and higher spending. It also gives rise to the endless pumping of stocks that CNBC engages in daily and nightly. This also gives rise to speculation that major banks’ trading desks have engaged in market-boosting activities at the behest of the Fed, principally through buying S&P futures. BoJ has admitted that it directly buys the Nikkei when it wants to engage in “wealth effect” activity. To imagine the Fed is too honest to do that would be worse than naive.
This is the same Fed that has, as documented here and elsewhere, engaged in $Trillions worth of market-manipulating activities both in the United States and abroad. It has admitted that it engages in these activities to “support prices.” You may recall the federal government recently announced it was going to sell oil from the SPR for the stated purpose of manipulating the market. Cheap oil = wealth effect. Cheap money (low interest rates) = wealth effect. Both of these are activities openly engaged in by government and government-connected entities. Why should stocks be different?
There are no markets, there are only manipulations. I don’t wish to be harsh, but watching the DOW or the S&P and equating it to the health of the economy is a fool’s errand, and one the dot gov wants you to engage in. Not to mention the even more harsh reality that would result from adjusting the S&P for real inflation and coming up with a “buying power of the S&P” number, which would start all of you crying right away. Your 401(k)s are being stolen from you, and the Bernank is the guy doing it.
If the S&P 500 is adjusted for the dollar depreciation as well as inflation they wouldn’t just be crying.
JJ- capital as in cash. And they’d spend it, hopefully.
Leave your response
The comments section is for meaningful discussion. Readers are reminded to post comments that are germane to the article and write in a common language that steers clear of personal attacks and/or vulgarities.
Please take a moment to review our comment policy.