Wednesday, June 6, 2012

Stocks Rally on Hopes for America After WI Vote

Of course, that's not how the mainstream media is reporting today's market rally.  Instead, they'd have you believe markets were responding positively to events in Europe even though all the news coming from them has been getting increasingly worse:
U.S. stocks rallied Wednesday as investors digested comments from the European Central Bank and weighed a new proposal for European-wide bank rescues and bailouts.
Really?  What were these comments that the Street just ate up?
The ECB left interest rates steady at 1%, though the decision was not unanimous, ECB president Mario Draghi told reporters after the meeting.
So investors in America are besides themselves with joy over the European Central Bank leaving rates the same?  I find that doubtful, but maybe prevailing wisdom was they were going to raise interest rates.
"A few members would have preferred to have a rate cut today," he said. Many analysts expect the ECB to cut interest rates by a quarter percentage point at its next meeting in July, which would bring rates down to a record low.
Huh?  A few ECB members wanted the rate cut to help the recovery and encourage spending and several analysts expect them to do just that, but they opt for keeping them the same and that's the comments made that have restored US investor confidence?

Here's the reality.  The US is rapidly approaching yet another debt ceiling crisis.  Analysts and economists alike are warning that the US must get its deficit spending under control or risk financial calamity.  The win by Gov. Walker in last night's recall election has been seen by the political and investment class as an endorsement by the American people for enacting tough economic policies that will bring the country's fiscal house in order.  It's also a signal that real recovery is around the corner if and when President Obama is sent into retirement by voters.


smoore123 said...

Wow. Obama finished his speech in Ohio and the Dow jumped 100 points. This must mean that Wall Street thinks Democrats are good for the stock market. I didn't read any interviews with market traders or see an analysis of the discounted cash flow implications of his policies on corporate earnings but hey, these things happened on the same day so they must be related, right? I also took a huge dump this afternoon. I wonder if that contributed to the rise in the Dow too. I had Taco Bell for lunch yesterday so my massive turd was probably baked into yesterday's market action.

James said...

Thanks for catching my point. One the media looks for an excuse to give Democrats the credit for any market up turn and looks for an excuse, no matter how nonsensical, to not give it to the GOP.

My post was in large part a response to stories like this one earlier in the year when they were telling everyone market rallies were occurring because Wall Street thinks Obama has locked up the 2012 election.

Markets are made of of millions of investors making millions of decisions based on millions of variables.

smoore123 said...

You are probably wondering how my massive turds could possibly affect the stock market (and that’s a reasonable question) but here’s how it works. Whenever I have lunch at Taco Bell I call up my friends at Goldman Sachs and let them know when I’m starting to get gassy, cause you know how those guys love a “shitty deal.” Ok so if I’m gassy it usually means there is a nasty turd working its way through me. The next day when the sucker pops out, and presuming it’s a solid log and not one of those spray the toilet bowl kind of things, I take a photo of it in a funny pose next to my cat with instagram and then post it up on the intertubes. While everyone on Wall Street is looking at and emailing the link to their friends, my buddies at GS take advantage of the low volume and start running up the market. The traders come back to the floor and think there’s a rally on because of some irrelevant news story that just happened and then they start buying like crazy. At this point GS just sells them back the stock they bought before and pocket a tidy profit. They keep the cash and I get free tacos. Our plan always works…well except for that one time I sharted in my pants before I could get my camera phone out. Sorry about the $2b loss guys.