Saturday, January 12, 2013

What's going on?

Years and years ago it was fairly easy to determine the direction of the stock market. Picking a stock was child's play by today's standards. Most commodities sold on a cyclical basis. So it was a simple matter to buy when supplies were plentiful and sell when they weren't. Much has changed since those days. Aside from the momentary glitches such as crop failures floods and tainted produce it's relatively difficult to see what's going on. Say what you will about Obama's leadership but he did manage to stabilize the markets in a few short years both by his actions and his inactions. The markets when he took office were headed for the 6000 mark and are now at over 13000. 

Markets tend to move on fear however and there's enough of it looming in the background to make anyone nervous. The resolution over "cliff" debate pushed the markets up. Still there's a lot of fear left to be sold. We now have the debt ceiling to contend with but anyone with half a brain would tell you they won't pull the trigger on that hostage situation. To do so would cause irreparable damage to their game. That would be like giving the house keys to a teenager and telling them you're headed on a two week vacation, "See you when we get back".

There's a couple of things going on at present, actually they've been going on for quite some time now it's just that we haven't paid attention. While we were keenly focused with our noses to the grindstone the grindstone owners were busy changing the rules. I believe some of the first rules to go were how much borrowed money could be used to buy stocks. After the grand depression that mom and dad experienced our leaders saw fit to bring a bit of sanity to the game. No more than 50% of stock purchases could be done with borrowed money. Somehow that rule was thrown out. Add to that the elimination of the rules preventing investment houses and banks to merge which created much of the mess we see today. It was now open season for investment institutions to use bank funds at the roulette wheel gambling not just your checking and savings account funds but using them as leverage that bloated the loss column on the balance sheet. But for anyone who knows a thing or two about banking knows that a debt is seem as an asset to a bank. That is until the house of cards came tumbling down.

Speaking of houses those too were part of the game as we saw from the sub prime mess. Much like a Ponzi scheme you can't keep the game going without suckering in more players. With language only a well educated attorney could decipher it was easy to catch the rubes. How quickly what mom taught us was soon forgotten that when it looks too good to be true it probably is. We stood back and watched cracker box houses that once went for under $100K now be valued at a cool quarter million. But then the bubble burst. Those easy credit terms weren't so easy anymore. Those unfortunate enough to have bought at or near the peak were wiped out just like the late comers to a Ponzi scheme. And all was going well until somebody decided to cash out their chips. Soon everybody was headed to the pay out window only the House had no cash and the pay out window was closed. To make matters worse, as if nothing could be at that time, the House had bet that the players would all lose which indeed they did. The problem came when the House wanted it's pay out and those covering it's bet had no cash either.

So as you can see it's all a matter of values and perceptions of values. Throw in some greed and dump a few rules and we're back to the Dutch Tulip run. Didn't this happen with Beanie Babies too a few years back? Did I mention tomorrow is 'No Pants' day in Seattle? How fitting.  


BBC said...

Tomorrow you can watch a football game to get your mind off shit you can't fix.

I don't do football but the club is opening early tomorrow and serving breakfast, I'm taking Helen there for a meal and so she can see what the new club is like.

BBC said...

Cold this morning, I'm staying inside and warm most of the day.

Anonymous said...

My Tutor makes a fine living "Day Trading" in "RIMM" stock, listed on the Nasdaq. RIMM being, "Research in Motion" - the Blackberry folks. The new BB 10 system is slated to launch on January 30. Watch the fireworks!

".......The markets when he(President Obama) took office were headed for the 6000 mark and are now at over 13000......"

Technically, this is not something of which to be proud. The Dow Jones Industrials - 30 Index is more a measure of the wealth accrued by the 1% at the expense of the 99%. Sure, Dow-based Pension Funds and Investment Funds - important for the unwashed masses with pensions and the odd small portfolio of Equity stocks - are better off, but the 'no-productive' money involved would be better spent creating actual wealth rather than just padding this 'Velocity of Money' aspect of the GDP.

And the 50% rule for ownership and the 10% margin rules for purchases were 'thrown out', as you say, by Clinton.
The Democrats are actually worse for the masses than the Republicans. Either way, the 1% always do well.

Anonymous said...

BBC said,

"......Cold this morning, I'm staying inside and warm most of the day......"

Thank you for sharing that with us BBC. I, for one, am always interested in the minutiae of your exciting life.

Tom Harper said...

The Dutch Tulip Run: All participants must wear wooden shoes and eat a pound of Gouda right before the race.

Anonymous said...
This comment has been removed by a blog administrator.
jadedj said...

Anonymous has a way with words.

Demeur said...

Billy you're probably excited that you're still breathing.

ALF I know it's a choice between cancer or leprosy but at least we peonage get a few crumbs with cancer.

Tom only after visiting the store front shops of Amsterdam. It puts everybody in a good mood.

Spammers not invited here J.

jadedj said...

It was tongue-in-cheek, D.

Demeur said...

So is most of what I report J.