If the Economy Is Tanking; Why Are Markets Up? (What's encouraging investors?)

The latest economic data released Thursday confirms what all Americans, especially business owners, already knew. Economic growth has slowed down to a measly 1.5% (from 2% the previous quarter), job growth continues to languish with nationwide unemployment at a dismal 8.2%, consumer confidence has fallen to its lowest level this year, and consumer spending is also tanking. Household purchases, which represent approximately 70% of GDP, grew at the slowest pace in a year. Recent surveys show that Americans have lost approximately 40% of their net worth in the last few years, and poverty rates are reaching levels not seen in this country since the 1960s.

So, why are the markets up? Everything confirms that our bleak economic situation just got worse. Obama's anti-business, anti-job growth, and punitive taxation schemes have not changed. The administration's stifling and oppressive regulatory policies continue unabated. The European situation has not improved or stabilized much, despite repeated assurances from the European Central Bank. The Federal Reserve in the United States is already out of options, despite speculation from the so-called financial "experts" who believe that another round of "stimulus" may occur, even though the Fed signaled just the opposite last week. Given the poor record of previous easing and the near-zero interest rates, there is very little the Fed can do now.

So what could possibly have influenced the financial markets to push the Dow Jones, S&P 500, and Nasdaq averages into solid positive gains for the day?

I think that most of us don’t understand the markets either. I’ve had the chance to discuss this with some long term investors and they have some interesting views. Most of which center around how the markets are manipulated.

And to be honest there isn’t just one or two manipulators, there are hundreds if not thousands of them. Each of them playing their game with the others. And if you aren’t a member of that club, well then you are at best the sucker to be fleeced.

My advice for what that is worth is to stay out of the day-trading and the penny stocks. If you want to invest look for a company that actually makes something or at the least has a product that is bought and sold. Buy it and hold it long-term and just ignore the market fluctuations. You’ll save a lot of money on Maalox that way.

Txrefugee is right.

Brokers these days make money by TRADING, not by making investments.

And since the public has been trained to think that UP in the market is always good news, young money-hungry traders have a vested psychological interest is selling up.

Then they sell off and take a bit of profit, then sell up again. It’s not entirely unlike realtors in the bad old days flipping properties, the proceeds of which were based on speculative prospects and upselling too.

The traders especially can make trades (thus money) on mostly bogus “good news” like the latest European Union popinjay promising “great resolve” in addressing the Euro debt crisis, or our own Federal Reserve planning to print and spend more money in the bond markets, etc., supposedly “easing” the cost of credit and investment (while really only debasing our currency and increasing the likelihood of an eventual financial panic and crash).

Party on! is the motto of the stock market and the people who sell it. They (and we) can all deal with the hangover later...or perhaps sooner.

The markets are up because the Fed's whole quantitative easing ("QE") program is aimed specifically at propping up the U.S. stock markets by: (1) artificially suppressing the cost of borrowing, and (2) reducing the returns on many investments that are alternatives to the U.S. stock market (U.S. Treasuries, for example).

This is how the stock market grows even while the U.S. economy declines by almost any other objective measure (employment, income, productivity, etc.).

I'm not a "gold bug" and I don't advocate for or against any specific type of investment, but this interview is a must-read for everyone on this thread:

The Emperor is Naked: David Stockman

American businesses, and more especially foreign businesses, have more value than dollars. But we are valuing them in the denomination of dollars. The value of the dollar continues to fall, and with each increment down, more dollars must be assigned in value to a company to meet the inherit value of the commodity or business.

Demand is down, the economy is down, thus the value of oil is down. But the price of oil goes up - why? Because it takes more dollars to buy each barrel of oil. Is the GDP up? Nope, the GDP has fallen quarter after quarter if you take into account deficit federal spending, up to a whopping 24% of the GDP.

So there you have it, why stocks are up when everything in the news cycle points to utter disaster. The DOW is a horrible measure of economic health.

This is easy. It is money creation by the FED.

I believe that It can be taken even further. Every time the FED is about to create money and dump it to the bankers(in exchange for JUNK) then they create a cover story. They get the German Chancellor to make a statement, They bring out Liesman on CNBC or whatever. It is all a cover. These statements are not what make the market jump up. They are simply an explanation, so that Gullible people don’t figure out what is really going on.

Yes the system is really that corrupt.

The market numbers have nothing to do with Obama’s Depression that rages on. Brokers buy and sell stock to each other. They are paid for each transaction, so the more they churn the stocks, the more they make in commissions. It’s the old S & L scam of the 70s redux.

Can you explain this?

This is not about the stock market going up. It isn’t going up. That’s a delusion created by the Fed. This whole phony economy the Fed has constructed with cheap money is going to come toppling down. But the reality is we have to kill this phony economy because it’s unsustainable. We need to replace it with a viable one but unfortunately to do that there’s a lot of short-term pain because we’ve got to unwind this bubble, and the Fed doesn’t want that to happen.

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