Skip to comments.The Economy May Stink, but the Stock Market Doesn't Care
Posted on 04/27/2013 6:08:51 AM PDT by SeekAndFind
Another lackluster quarter of economic growth is likely to have the same impact on the market as its predecessorswhich is to say, not much.
Despite a prolonged period of weak improvement in gross domestic product, stocks have continued on a progressive, albeit bumpy, ride higher.
The 136 percent stock market surge over the past four years has come despite the weakest recovery since the Great Depression, and more recently signs that those expecting a period of stronger growth will be disappointed.
No matter, though, as investorriding a wave of Federal Reserve liquidity and sentiment that the U.S. remains a safer store of money than its troubled global competitorskeep buying despite the slow economy.
"There's just this disconnect from reality," said Kathy Boyle, president of Chapin Hill Advisors. "The high-frequency funds are just controlling this market. Anyone who's rational thinks this market is overvalued and things are slowing down."
Yet a quarter that brought such lackluster growth2.5 percent against expectations of 3 percentsaw the stock market surge 9 percent.
Friday's letdown had little effect either way, with major averages treading water around midday.
The GDP report came amid a backdrop of a so-so earnings season in which influential Dow Jones Industrial Average components Caterpillar and AT&T reported substantial slowness in their business.
"The major industrials are telling you things are not good," Boyle said. "China is in slowdown, Europe is in crisis. But la la la, we're still going to trade the market."
One of the main drivers behind the trading mentality has been the Fed and its $85 billion a month in asset purchases.
In addition to the basic liquidity, it's also fueled a belief that even if conditions don't improve dramatically, they'll be enough money around to keep equity prices floating.
(Excerpt) Read more at cnbc.com ...
The stock market is driven and controlled by expectations, speculations, and manipulations, seldom reality.
Except price/earnings ratios are well within historic norms. And corporations represent real assets that will at least partially hold their value against inflation.
Either all that government money is just buying government debt (minus the political graft), or there’s something I don’t understand.
The stock market averages are being falsely inflated because the government is printing $86BILLION a month and using the market to filter that money into the economy. Wall Street is a money laundering operation for Obama and all these inflated values are being purchased with worthless money.
It is incredible to watch Obama's media happily report that the market gained today while no one is asking the obvious.
Soros just bought 17 mil. shares at JCP....
I recall the same “irrational exuberance” during the tech bubble.
“government money is just buying government debt”... swell LOL
Didn’t they just fire the CEO?
Exactly. The 100% plus run up is not that impressive when you realize it came after about a 50% drop. That gets you back to even. The market is not unusually high, and breaking records that are 10 to 15 years old is not very impressive.
I no longer dabble with the stock markets after watching several speculator day traders fritter away their lives, lose their homes, their families, their lives, and minds. I watched them use the most sophisticated stock market trend prediction software, surf the Internet all day long looking and posting in forums, due diencephalic research, etc...you name it. My conclusion in today’s world not the yesteryear stock market - the stock market is a heavily manipulated system that induces people to invest their hard earned money despite what their common sense tells them. It’s like gambling only in a more orderly fashion where the investor is led to believe he is playing a game where he can use his instincts and intellect to make decisions that will lead to more money. What he doesn’t realize is that the system s rigged and they have already taken all of thy into account like a skilled actuary that sets insurance rates. The only people that can play to win nowadays are the ones that can afford to lose.
Look what happened this week with just one hacked tweet. We are one big falling domino away from 70-90% correction
Benjamin Graham -- who was Warren Buffett's mentor more than 40 years ago and wrote some great books on stock market investing -- correctly pointed out that anyone investing in the stock market should know a lot about the companies they own before they buy into them. Someone who makes stock market buy/sell decisions based on some kind of predictive software isn't "investing" at all.
The market dipped to 6,600 in March 2009 and is now over 14,500. It's all being manipulated, but someone is making money. When they start cashing in a lot of others are gonna get hurt, I think.
That statement is so true, it hurts to say, write or hear it.
Real inflation drives prices up.
The main reason we had such a boom in stock prices in the late 90s is because of the advent of stock trades via the internet. This caused a huge shift in the demand curve. People in this country who had never even met a stock broker could now go online and purchase stock. People overseas sitting on dollars could now get on the internet and purchase US stocks.
Today, we are experiencing a massive increase in the money supply via the current Fed policy known as "the-printing-of-the-money". It results in more dollars chasing fewer goods, with stocks being one of those goods. Just as bread prices, meat prices, gas prices, and rents have gone up, so have the price of stocks. I don't see people getting all excited when gasoline hits $4/gal, yet when stocks hit some high price, everyone wants to translate that into how well the economy is doing.
Some day, when you look up “fool” in the dictionary, you’ll find a picture of Bernanke. Only a fool would think you can spin the straw of this horrible economy into gold by massive borrowing.
Stop pouring in Billions of funny money and watch the floor drop out. The Stock Market is doing what every fire you pour gas on does.
> I beg to differ with you on a lot of what you’ve posted there. A “day trader” by definition isn’t an investor at all. He’s really a speculator, and a lot of the conventional wisdom about the stock market goes right out the window in those cases.
Fair enough. All I’m posting is an opinion based upon my own observations over the years. It’s not gospel but I have a question - are you one of those able to invest and take a loss with little consequence?