Tuesday, August 17, 2010

Market reactions

I don't know much about the US stock market and I generally don't like to comment on matters that I don't have at least a passing expertise, but I am an observer of things and I am perplexed enough to seek guidance on the following observations of the market's reactions to events:

1. When the dollar was weak , that was bad. But when the dollar got stronger that was bad too.
2. When the price of oil was high, that was bad. But when the price of oil dropped that was bad too.
3. When the EU economy was strong, that was bad. But when the EU got weaker, that was bad too.
4. When China's economy was strong and growing rapidly , that was bad. But when China started to slow it's economic growth, that was bad too.
5. If interest rates rise, that's bad. But if interest rates stay low, that's bad too.
6. The US economy is clearly weak and in trouble, yet the rate of interest on our Treasury bills is extremely low ( which is usually an indicia of economic strength) because we are the strongest and safest country in the world in which to invest.
7. US consumers didn't save enough and that was bad. US consumers now save too much, and that's bad.
8. Banks were justly criticized for making too many loans to less than credit worthy borrowers. Bank are now being criticized for not making enough loans to less than credit worthy borrowers.
9. We want banks to lend more, yet we pass laws and regulations which make it harder and less profitable for banks to lend more.

We all know that the one thing we can agree on is that the jobless rate is too high and that's certainly bad. However, I won't be surprised that once the jobless rate goes down by a significant amount that will be bad too.

Can someone out there enlighten me, please.

It seems to me that the market has a mind of it own and interprets data to fit whatever scenario in its wisdom it wants. Of course the market is not a person, so you may ask how does it have a mind, or wisdom, at all. Not going there, yet.

However, I've noticed that all market analysis takes place after the market does it's daily thing; never before. I guess if I could do it before , I won't have to worry about what the market is going to do and I'd be a very rich man.