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Wednesday, March 30, 2011

How stock markets rationalize in order to rise

Do you ever wonder how the markets go up when economic data is bad?

 I mean besides the fact the market doesn't give a damn about the economic realities facing the bottom 98% of the nation..  how does the market justify going up when everything else is going down?

Simple- it rationalizes.

You and I play this manipulative mind game all the time.. it goes like this:

"It might be 20deg outside but at least it is not snowing..."

"The price of gas went up today 10cents but I expected it to rise by 15."

"My thermometer says my fever is 101.8 but I expected it to be 102.5..."

That is what the evil stock market does- it takes all economic data and twists into a positive by creating exaggerative lower expectations ahead of time knowing the data will never be That low, then treats the difference as a Positive to give justification for the Dow to go up and investors & traders to increase their profit.

Let's look at today's news as an example...

Home price declines deepen in major US markets (AP) - "Damage from the housing bust is spreading to areas once thought to be immune. In at least 14 major U.S. metro areas, prices have fallen to 2003 levels -- when the housing bubble was just starting to inflate. Prices will likely drop further this year, making many people reluctant to buy or sell. That would push down sales and prices more"

Inflation worries push consumer confidence lower (AP) - "Rising prices at the gas pump and in grocery aisles are starting to crimp shoppers' outlook. The Conference Board's Consumer Confidence Index fell sharply from a three-year high in February, reversing five straight months of improvement. The decline raises questions about Americans' ability and willingness to spend in coming months. The index fell more than expected to 63.4 from a revised 72.0 in February. Economists expected 65.4 ...

~ Yet Tuesday the evil investors and traders helped push the market up 81 pts to close at 12,279--  why?  What was the nugget of good economic news that became the catalyst to push the Dow up??

This bit of nothing..

"Stocks finished broadly higher Tuesday after consumer confidence fell less than some analysts had feared...Goldman Sachs had forecast a drop to 60" (AP)

It is important to understand the bullshit which is the US stock market--   The Consumer Confidence index dropped to 63.4, OK...  Economists expected 65.4, thus making the drop WORSE than expected, not better... Yet.. The market wanted a reason to go up; some justification... So...  it chose to look at Goldman Sachs' purposely pessimistic prediction of 60 as the basis point.   Why?  Because anything above that number is 'better than expected' and justification to keep the 'recovery' lie going.

Did you know:  The Consumer Confidence board surveys only 5,000 families each month...  That's all- 5,000.  There are currently 112 Million families in the US.

So based on four-one hundred thousandths of 1 percent (0.0004%) of US families, the Consumer Confidence board comes up with a stat that thousands upon thousands of media outlets report as the end-all  be-all of the nation's economic mood, and when combined with outright statistical manipulation, can cause a corrupted stock market to rise for no real reason.

Also, currently consumer confidence is 63.4... Healthy confidence is 90 & up...

This point should be understood by anyone who reads A&G- the stock market does not represent the true American economy.   Things overall are very bad and not getting any better.

So why then is the stock market growing?

Simply put-- The Federal Reserve is intentionally creating a stock market bubble to replace the deflated housing bubble which caused the current recession.  The Fed is pumping over $2billion dollars A DAY into the market so it will expand and attract everyday people to put every last penny of their savings into it.    By denying people a savings rate of return, the Fed is 'steering' people to the risky, volatile stock market.  

This is not free money- it is new debt which will need to be paid back with interest through higher taxes and harsh austerity to this generation and the next... all because investors are not allowed to take a financial haircut on their risky derivative investments from the 2000's.

And now you know

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