Posted on 06/06/2012 2:40:53 PM PDT by SeekAndFind
Earlier we joked that some people thought today's rally was the result of the election outcome in Wisconsin last night.
Well, serious people think so too.
James Grant, of Grant's Interest Rate Observer, was just on CNBC, and this is what he told Maria Bartiromo:
"...Today i think part of the source of the levitation was the Scott Walker triumph in Wisconsin."
He explained:
"People maybe are discounting the prospects of a return to something like freer if not free markets come the Fall if Romney or GOP decisively wins."
Grant also said he expects a third round of quantitative easing and reiterated that the long-term implications of QE3 are bad. He said the "world has 2008 on it's brain" and the awful memories of 2007 -2009 have the global economy preparing for a replay:
(Excerpt) Read more at businessinsider.com ...
As a complete amateur when it come to the stock market, would a learned FReeper please school me on what the term 'discounting' means here? I do not understand how 'discounting' means the market rose significantly.
Imagine if the gop grew a set after being voted in and IMMEDIATELY announced the dismantling of Department of Education, IRS,Homeland insecurity, ATF, and EPA... woah nellie...
RE: discounting.
Here is how I understand it...
This is the premise that the stock market essentially discounts, or takes into consideration, all available information and present and potential future events.
When unexpected developments occur, the market discounts this new information very rapidly.
The fact that the stock market is essentially a discounting mechanism explains the wild swings in stock indexes following unexpected events such as a natural disaster or a terrorist attack, or an earnings miss in the case of an individual stock or maybe in the case of Scott Walker’s victory, a harbringer for this November’s elections.
Of course, efficiency of the stock market as a discounting mechanism has been vigorously debated over the years. I am not going to get into that.
Well the Financial Times say stocks rose on hopes of a stimulus, but I’m like you and believe Walker’s win was a big influence.
No doubt at all!!
SeekAndFind gave a good response, to which I would add: In order to benefit from market moves, one has to be IN the market BEFORE the move happens. Yes, it is true, that today, had you bought the open of the market and rode the all-day rally, you would have been golden. But that is generally not the case, getting in late is normally called “chasing” a move. That bears the risk of getting involved in the profit-taking that may occur while the early-inners take positions off as the market rises. Yet chasing, IMO, is probably the best-odds non-fundamental-based approach. (Of course, holding while the market is doing nothing, or still declining, before the move, which you have to do to be in the move) bears its own risks.
Subpoint being, there is always a tendency of “latecomers” to chase a move. There is always a tendency for shorts to scatter (which means they have to BUY, increasing the intensity of surprise up-move) should an up-move begin and gain force.
Real point being, the best position is to front run a move. If you can. To be in before it occurs. Whether that move is a longer-term, sustainable move, or, a mostly a one-day orgy plus probably a little follow through of buying after a period of revulsion as was today.
One-word answer, “discounting” means “anticipating”. There is also a proper technical explanation, primarily applied to “discounting a note” which means, if you are the owner/recipient of say a mortgage and want to sell it and get cash today instead of your stream of payments over time, a buyer of your note generally will not give you full value. The obligee/payor may decide to pay the note off early, leaving said buyer of your note without the interest he may anticipate. The buyer may default, leaving him with a loss and the hassle of a collection effort.
Facebook was another example. [The price of Facebook stock on its IPO] discounted the glorious future of having every person on earth using their service. Those who bought the stock at the open that day paid for all the possible growth the company was anticipating, of course, painting a rosy picture of the future.
Oil went up. Another day of government dumping of pension money polluting the so called “market.”
BS. The market spiked due to the Walker/GOP victory. If it was NOT the Walker/GOP victory, the Dow index wouldn't have budged an inch....or, most likely, it would have gone down quite a bit.
The Media spins anything 180 degrees if it's favorable to the Republicans or Conservatives.
Leni
I don’t doubt it one bit. Just purging the Obamabastard from the oval office serve as a purgative for the American Body Politic and restore the intestinal vigor of a moribund economy.
I’m with you - Walker;s victory was a big factor in markets going up.
Scott Walker victory news is fading faster in MSM than snow flakes in July.
Now pins and needles while awaiting SCOTUS' decision on Obamacare...wait and see what the markets do after that decision.
” Have any of the business stories in the MSM tied the rally to Walker’s victory? I haven’t seen any yet.”
Neither have I, and I was looking.
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