Just now, I sent out the following email to the TRMS staff under the subject line "meanwhile..." --
The stock market is going absolutely bananas today. The Nasdaq hit a 12-year high, and here's how the Dow looks at the moment:
That red arrow there indicates the reaction to the European Central Bank announcing that it's going to start buying government bonds from Europe’s struggling countries (hey look! a central bank that acts!) Just in terms of the whole "Is the country better off now than it was four years ago" thing, this seems to be sort of a significant moment:
The Standard and Poor's 500 index soared to its highest level since January 2008 in a rally that seemed destined to mark a milestone: American stocks have come almost all the way back.
The only person who responded was Rachel, with this: "The communist usurper Hussein Mao-bama must be furious."
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Hmmm. Before this, it's been all austerity, all the time, but as soon as there's a crack in the absolutism, the business community loves it. Makes you wonder, with all the austerity talk in the GOP, which party is REALLY on the side of business prosperity.
(Well, I don't wonder, but that's because I've known. Maybe a GOPer will start wondering... and perhaps pigs will become avians.)
It's not the same thing as in the US. The Germans had an experience with hyperinflation that cut deep into their national psyche. It was super hard culturally for them to rise above the impulse to retract into self defeating austerity measures.
As for how investors read this? There is general agreement that this sort of move would be a great boon to Europe's economy. Investors don't care whether it is true or not- they care whether most people believe something is true and are going to bid more aggressively for securities. If they think that everyone is diving into the feeding trough for stupid reasons, it is irrelevant. They are there at the feeding trough playing the game of buy low/ sell high.
So it is no indication of a change of philosophy- it's a simple re-affirmation that craven expressions of greed have no use for ideology.
Grumpy,
If you go back and paste the business cycles over the administrations of the last 50-60 yrs you will find a distinct trend that business does better during Democratic administrations. I believe this is mostly because business doesn't really care who is "in charge." They just want to know what the rules are. Ane Dem admin. are typically steadier in that regard. Rep. admin. tend to try to change things way too much. They SAY they are doing it to help business but more honestly, they are doing it to help themselves.
Regardless, historically, business does better with a Democrat in charge!
Volume continues to be light. 70% of it is computer driven (high frequency bots trading with each other). Watch the selloff at about 2 PM Friday.
Robert - You must have read the Wired article too. . To my friends out there who are sci-fi fans , Skynet won't come in the form of killing machines , it will be trading bots destroying your finances and bringing the economy to it's knees. This article scared the sh!t out of me.
http://www.wired.com/business/2012/08/ff_wallstreet_trading/
Actually, volume was very slightly above average. After the recent second, Knight, flash crash, I expect some sort of new rules about HFT someday soon.
I knew I shouldn't have sold my banana stock.
There's always money in the banana stock!
How about Rimm ? we all make mistakes
outstanding news.
moving Forward!!!! just wish the other so called Americans in that other rag tag bunch of obstructiveness greedy treasonous bastards right/wrong wing party would just help a little we be on our way to the good life again.
The reason it's going up is because I get paid tomorrow and will thus be making an automatic 401(k) contribution that will be invested in the market. Because there's always a burst of "Hurray! Hurray! The Euro Crisis is Over" hysteria the day before I get paid.
Then, after my 401(k) funds' transactions have settled, I'm guessing sometime next Tuesday afternoon, The Market (which is, of course, a single sentient entity) will realize that the
GermanECB demand for more austerity and restriction of deficits to 3% is not a deal Spain can possibly accept and the bottom will fall out again and my purchases will lose much value.Yeah, hate to come off grandiose saying its all about me, but dammit, it happens every time.
Just because you are being paranoid doesn't mean that you are wrong. It isn't about you, everybody gets paid tomorrow, everybody's 401(k)buys high tomorow.
Mittens and Pauly must be really disheartened: Are we better off than 4 yrs ago- Hell Yeah!
Before everyone starts getting giddy over this news, remember that this is just a bandaid and doesn't fix the underlying problems.
And DO NOT kid yourselves, this IS more "AUSTERITY"!!! When a country signs up to have the ECB buy its bonds, it agrees to "conditions" and you see how well that's worked in Greece!
http://www.forbes.com/sites/afontevecchia/2012/09/06/draghis-circus-how-and-why-the-ecb-is-buying-bonds-to-save-europe/
What this does is also put taxpayers in those countries who actually have a stable economy in Europe at a higher risk if any one of those countries that the ECB is buying bonds from, fails. This isn't going to turn out good in the long run - for anyone!!
Yeah, but the ECB is doing something real- they are killing the speculation on these bonds, which was an artificial pressure on these countries.
No, John, they haven't!
What they have actually done is INCREASE the speculation on these bonds. Those financial institutions who bought into these debts, now know that there is less "risk", cause the ECB will come to their rescue by propping up these weak countries for a little longer- so they can go and speculate EVEN MORE!!! The taxpayers still have a few bucks left that the "bankers" can get their hands on!!
What Draghi is doing may cause the bond yields to drop so they can keep this "bond bubble" going but in actuality, this doesn't mean the country selling the bonds is in a more stable condition and this doesn't mean the country selling the bonds won't default .
The more bonds a country sells to make money, the more they have to pay in total yield, until there comes a time when a country has sold so many bonds out that it can't pay the yield on any of them - then what?
Remember, the ECB won't be buying ALL the bonds a country sells, MOST of those bonds are bought by financial institutions, and they will be sold through the country's banks. These financial institutions are thinking they can "predict" when the merry-go-round slows down and they "think" they can sell their bonds before the "bubble" bursts.
But sooner or later, SOMEONE is going to get stuck - and it will be the taxpayers who have to bail out the financial institutions and the banks.
This DOESN'T help the people in those countries, it helps their FINANCIAL Institutions, and frankly, that money NEVER gets down to the taxpayer who is on the hook to pay those yields! Why do you think Spain went to the ECB with its hat in its hand? To get money to help the unemployed? Nope, to save its banks!
How is it "real" when they'll only take action if the countries whose bonds are being run up accept conditions that are impossible--not just from a domestic poltics, but from a mathematical standpoint? How can Spain possible restrain its deficit to 3% of GDP when doing so will reduce its GDP which, in turn, will further lower the permissible size of its deficit, and so on and so on and so on?
This is the part that the Germans just don't seem to get. Evidently because their great gampas deliberately inflated the ever-living crap out of their currency to get out from under the Versailles Treaty war debt in 1923 which, evidently, in their minds is what caused Hi . . .eee who must not be named to take over ten years later. And therefore ordinary Greeks and Spaniards must be severely punished for being all Mediterranean and irresponsible and stuff. Because Hitler!
And this on your "sister" network CNBC:
Most Hated Stock-Market Rally in Years Goes On
What is wrong with people?
Those douchbags are Un American. I got mine screw you I want more .
By the way, Rachel, though I loved the sarcasm in your comment, just think of the stink it would have made if someone, say, from Fox News had made it?
"The communist usurper Hussein Mao-bama must be furious."? Is Rachel trying out for FOX? I bet they would pay her a fortune to join their team of fiction writers.
My guess is they won't get the joke anyway.
The stock market (which is mostly run by computers these days, not people) is neither an indicator of real economic growth nor structural economic health.
The ECB buying countries bonds to fund their governments is roughly the equivalent of the Fed Res, buy state or municiple bonds to support those government. It might work, short term, but doesn't solve the problem...unless you're after Michigan style oligarchy (or if you prefer, tyranny).
MR. PRESIDENT ,
You need to stand up against the lies the right is making on the National debt.
They are accusing you of spending $6 TRILLION during your term.
I know for a fact that they are all GOP policies that caused it.
Fixing the GOP screw ups is not your spending Mr. President it is theirs.
Stimulus to save the GOP screw ups are LOANS not spending.
INTEREST on the GOP TRILLIONS of debt is NOT yours to be responsible for.
MR. President,
They will say the Democrats had a “majority”.
But we all well know the filibustering, obstructing GOP has the “CONTROL”
The unfunded wars were GOP started wars based on deception.
Mr. President,
The $16 TRILLION National Debt is GOP Policies of the past 32 years.
Stand up for your record and denounce those accusations.
Use their debt clock against them.
Mr. President,
Use ARITHMETIC against them.
Democratic policies that added to the National Debt = ????
Deduct that from $16 TRILLION
The balance will equal GOP DEBT.
This is NOT blaming the GOP or BUSH.
This is ARITHMETIC Mr. President.
You know how they say Obama keeps blaming Bush, keeps blaming Europe, keeps blaming everyone and everything but himself? So now, even if it just seems the ECB is doing something to ease the Euro crisis, the market here goes nuts. In this global economy, the European market, now the largest in the world, buys our movies, buys our planes, buys our stuff. And that means more jobs here to make stuff for Europe.
Gee, Europe DOES have something to do with it! And Wall Street knows that.