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Thursday, March 3, 2011

Markets v. Reality for 3/3/11

Trader #1:   Buy Buy Buy.. Sell Sell Sell
Trader #2:  Money Money Money.. Yummy Yummy Yummy

What is the correlation between Wall St. and real economy- let's look..

Here's some financial news...

"Twenty months after the worst recession in decades, job creation remains anemic, weighing on economic growth and making it even harder for the long-term jobless to find work." (Investors.com)

And..

"The recent surge in oil prices is cascading through the U.S. economy, forcing sharp increases in gasoline and other fuels that will impact spending for months to come.  Pump prices, which are already the highest ever for early March, jumped another 4 cents Thursday." (AP)

And..

"Global food prices have reached their highest point in 20 years and could increase further because of rising oil prices stemming from the unrest in Libya and the Mideast, a U.N. agency warned Thursday. Skyrocketing food prices have been among the triggers for protests in Egypt, Tunisia and elsewhere, and raised fears of a repeat of the food price crises in 2007 and 2008."  (AP)

So, Wall St must have had a bad day digesting all that bad news, yes?

Dow at 12,262  (+198) as of 2:30p

And what is the rationale?

"Expectations that Friday's jobs report will show that the unemployment rate fell from its current level of 9 percent" (AP)

So simply put, this is what happens often:  Unless there's an unexpected crisis which shocks the market, investors ignore economic Reality (truth) and the market expands based on economic Expectation (wishful thinking, hoping).  Then when its wrong which is Often, it Rationalizes (empty pseudo-intellectual excuses).

To an investor, every day is another opportunity to profit- off economic growth, stagnation and recession/depression; to profit off global suffering and misery i.e. increased food and fuel prices.  All that matters is where to invest the money for that day--  stocks, bonds, commodities, Treasuries, currencies, other global markets... Doesn't matter.  Must make money... and nations around the globe bend over backwards to accommodate and placate them.

Why?  Investors buy short term and long term debts' of nations through bonds which allow indebted nations to have the $$ necessary to keep their economies afloat, especially if they're unable to print their own money without limit like the US does.

Understand this--  Wall St. is Not a barometer of the real economy.

If it was, the Dow would be around 8000 & not over 12,000.

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