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?
"The Ship of State is awash in a sea of fiat currency and the Feds are using the rudder as a paddle." (A resurrected quote from bubba carter's time.)
None dare call it a subsidy.
So, while I worry that our currency is being debased, and our national debt is getting out of hand, I console myself by going along on the stock market ride. I've done very well the last several years, and as long as "quantitative easing" continues, I'll stay invested.
That said, the party has to end sometime, though whether by fire (hyperinflation) or ice (deflationary depression) is not known, or at least not by me. But the end won't be pretty. With this in mind, I've moved my portfolio in the directions of conservatism (adding gold and gold miner ETFs during the recent drop in gold; moved toward recession resistant and dividend paying "sin stocks" like Philip Morris International; maintained a substantial position in a well-run, profitable regional bank which has made some strategic moves I approve of; and have increased my exposure to Singapore and China).
Don't like the Fed's policies? Join the club. But don't pout about it; take the gifts they offer.
I'm not sure what you mean by this. When I invest, I don't use money that I need for other purposes. Anything I'm investing for short-term needs is put into safer investments, and I'm willing to take more risks on long-term investments where I can absorb losses.
It sounds like the folks you've observed were trying to earn a living through their investing, or were investing money that they had no business investing. How does someone lose a home due to failed investments, for example?
The Plunge Protection Team at the Whitehouse is working to make sure that the markets stay up.
It’s also driven largely by POMO ‘investments’ and the PPT, which saves the day just about every day there is a fall.
The DJIA is a joke of a bubble just waiting to pop.
The huge bullion bankers had a short on the price of gold so they caused the price of gold to collapse recently. So they made a fortune.
With the price down, I’m sure they turned around and snapped up lots of physical at the low prices.
The rich and powerful are running things and ruining things.
All we can do is heed my tag line.
You are most certainly correct.
No you didn't. Sir Alan made that stupid irrational exuberance gaffe way back in the mid-90's and the markets appropriately ignored him for years. Much later at the end of the decade when there really was a bubble threat he was (as usual) oblivious and was busy crusading against (you guessed it) Y2K!
Greenspan is an idiot. No way around it.
You are most certainly correct.
So say the bonkers-left that seems to have taken over. Reality is that folks like me who're rich and powerful got this way though hard work. We're doing fine, but the problem most people got is all the poor weak professional victims that are "running things and ruining things."
Mr Madoff concurs.
Don't ignore Greenspan's money-printing as a cause of the dot-com boom.
I believe you should watch China closely.
If we ever. Using that word advisedly, ever. Get a national goal of bringing back US production.
China is not the place to be.
I have seen zero sign either party is even considering that. Or has ever considered that. Or for that matter ever would consider that.
I merely say if it happens, don’t stay in China.
They have managed to disconnect the stock market from reality. What’s left is a straight up Ponzi gambling scheme
Which is why I'm scared to death that once the Fed stops printing money and injecting it into the economy (and since there's really no place else to put it, it's going into the stock market), the market is going to crash, and it will probably be a lot worse than 2008.
The stock market simply doesn't make any sense at this time, and it seems that stock prices haven't been based on company financial health for quite some time.
The gold bugs will also not happy as we will witness a repeat of FDR confiscation of gold (about 80 years ago to the day).
That is why when the Pauls, father and son, sought an audit of the Fed just like we force an audit of Apple for example, they were rebuffed big time. Likely the Fed has trillions in outstanding due bills receivable from the EU, Latin America and parts of Asia that should be classified as uncollectible. The Fed's true balance sheet would make Madoff's look like a solid debt-free enterprise.
It actually does.
The main reason the stock market surged over the last few weeks is because Obama lost the sequester fight.
Investors take heart when Obama is weak and Obama has been having a rough go of it lately. Same thing happened in the period of time after he initially took office. When it was apparent that he wasn't going to get cap and trade through (a major reason the market was weakening when it looked like he would take the Presidency) we had a major run up.
If he fails dramatically on the budget look for levels to rise even more.
> It sounds like the folks you’ve observed were trying to earn a living through their investing, or were investing money that they had no business investing. How does someone lose a home due to failed investments, for example?
Refinancing for more than the remaining balance to get cash in hand and having a marriage go down the drain due to the “addiction” all at the same time. Bad decisions after bad decisions.
You and others did. But, a large number have been corrupt. I've run into them personally. I don't circulate only the lower echelons of the socioeconomic classes. Some of the upper level folks are profoundly corrupt even though they may have made their riches honestly.
All hell is about to break loose. When it does, truth will be the first casualty as someone a long time ago said.
Sorry late getting back to your post...work day.
Yes they did...about three weeks ago...Re-hired Ullmman, (re-tired former CEO) to stabilize the plane from it’s nosedive....and he’s got a grip on all the handles very quickly.
Someone said not to underestimate Ullman...but he did keep Penneys stable thru the finaincial 08 fiasco. So I’m not surprised. But what he faces now is a far greater challenge.....looks like it’ll work...at least we’re seeing changes at the store level happening very rapidly now, so he’s wasting no time at all.
Well, it doesn’t sound like you got your cash by being smart.
What I was referring to was not you, and people who have a million or two socked away.
I was referring to the uber-rich and powerful: those who run JP Morgan and CitiBank, and Chase, and Goldman-Sachs; those who are the top echelons of the tier-1 banking cartel; those like Immelt and the Roberts of Comcast who use their corporate position and their money and influence in order to get involved with fascist-style governmental economics.
They are the ones who are running the show (pushing for QEternity, bail-outs, etc., all the while reaping their bonuses though their financial firms should have been put out of business because of their excessive risk and criminal behavior). They are the ones who are ruining things.
So before you assume that anyone who ‘blames the rich’ is playing the victim game and you attack them for stating what is wrong with our economic and especially our monetary politicy, ASK for clarification.
You're closer to the truth than you may realize
Being smart is way over rated and I find brains gets trounced every time by hard work and attention to detail. When some say they think I'm 'slow', I tell 'em it's just that I'm geared down for a heavier load.
Back on topic, lot's of people blame the problems of the world on the rich & powerful & mho is it just sour grapes. In their heart of hearts they know they could have had a lot more wealth and power had they just put in a bit more effort. We pretty much all live with the results of our choices but not enough of us are happy with what we earn and even fewer are willing to admit they got what they deserved.