Its Tuesday... back to Finance talk..
Yesterday the Dow dropped another 139pts to close at 14,659
As we like to say at A&G... Good...
One week ago-- the closing bell of June 18th, the Dow finished the day at 15,318
In 5 trading days its dropped 659pts or 4.3%
Of course it could jump later today by a couple hundred points for no particular rhyme or reason but that's really not the focus of today's posting..
Its the rationalizations.
Here are just some of the ways financial media and its 'experts' are calling this current market drop:
* 'Summer Swoon' -- Sounds refreshing.. like a mint julep on a hot day; gives the impression its completely normal to see a drop like this every June, thus relax and keep investing...
* A 'Pause' -- Rationalizing that stocks can't go upwards every single day can it? So, just relax and.. well.. keep investing..
* 'Downward revision' -- This is 'Big Boy' chatter for the same thing as a 'Temporary Retreat'... The market is down --its perfectly understandable and logical and thus the Professionals can relax and begin 'buying on the dip'...
* An 'Adjustment' -- This is a more simplified term to help everyday investors feel confident to keep investing... Sometimes the word 'Temporary' will be injected by media for extra Ummphh!
* 'Profit Taking' -- This gives the impression something bad is good. If the market going up is a good thing, and a dropping market means 'profit' which is good, then by the rules of academic practical logic, Every Day in the world of stocks and finance is a 'Good' day...
* A 'Price Reset' Opportunity -- This sounds complex but in simplest terms the logic follows like this: That stock that should be valued at $20/share and was $25 a week ago... Well now its $19 so, 'what are you waiting for-- Buy, Buy!!!'
On and On and On...
“However toplofty and idealistic a man may be, he can always rationalize his right to earn money.” -- Raymond Chandler (American Writer of Detective Fiction 1888-1959)
See, its not going to get better.. Maybe you'll see a couple hundred point spike here and there based on a Fed rumor, but right now the market is reacting in panic mode on two things:
1) Bernanke hinting the QE party will be ultimately tapered and end
2) Higher interest rates
Even if the Fed is not specifically raising them (which ultimately they will have to do at some point), lenders are taking it upon themselves to raise rates for him.
This means if someone took a $100k mortgage for 30 years back in April at 3.75%, their monthly payment will be $463.12. The person who took out the $100k mortgage today at 4.25% will be making monthly payments of $491.94.
That additional $28.83 may not seem like much but when you multiply by 360 monthly payments, it adds to an additional needless cost outlay of $10,378.80
Credit card interest rates increased on average to 14.96%
The Fed pretends to care about the every day person's ability to survive, but they don't.. Their 1913 charter is to represent and protect the banking interests at all times at all costs.
And since banks are so dependent upon the stock market for generating profit, the Fed then has to care and ensure the market is profitable.
We've said this before.. we stand by it -- spinning plates can not be kept artificially spinning forever. Ultimately some stop and smash into pieces.. Something about Laws of Motion and Universal Gravitation..
Hey, don't blame us.. Blame Sir Issac Newton...