The parable of the ox in this piece is worth the price of admission. It reveals a fundamental truth of economics which — as an aside — divides the classical theorists into two camps, the Smithians and the Marxians.
The good news on the stock market and the parable of the ox
Published
Just a friendly reminder. The Stock Markets are NOT the economy.
But you know that.
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It is easy to say what the stock market isn’t:
It isn’t a paramecium.
It isn’t a tennis ball.
It isn’t an automobile.
It isn’t a statue.
It isn’t a waterway.
It isn’t an asteroid.
It isn’t an idea.
I could go on…What it is, however, is an institution where the wisdom of crowds operates, hence, perhaps, the reason it is mentioned in the article.
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The vast majority of trades are done by computers and at speeds no one can keep up with.
The “crowd” is out of any decision making. It is however, part of the way the smart money manipulates buys and sell offs.
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RE: “The vast majority of trades are done by computers and at speeds no one can keep up with.”
One estimate holds that about 80% of stock transactions are executed by computer, but it would be false to say all those transactions represent computer-made buy and sell decisions. When you tell your broker to buy or sell a stock when it hits a pre-determined price, a computer will likely execute the order, but the decision is one made by a human being. Thus, the wisdom of crowds principle is only slightly diluted by computer-based transaction processing and remains undiluted for the 20% of transactions which are executed in person.
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“… it is, however, is an institution where the wisdom of crowds operates,”
How many tulip bulbs are in your garage?
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Your list is interesting. But the bottom line is the stock markets are not a true harbinger of the economy. If so, it seriously should have tanked when the unemployment rate shot up to 14+%. But it actually went up.
Seems like a sign that those MOST effected by an economic downturn are NOT on Wall Street, but on Main Street.
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The stock market is a prediction of economic growth by investors who have significant resources to make such determinations. An up market means all signs point to a growing economy despite lefties hoping otherwise. I know, it hurts you. Now get back to that job you still have.
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An up market just means they are depending upon the Fed to send more money.
A solid economy has a growing GDP and increasing productivity. We have been low on both. The GDP has not passed an annual 2.9% since before the crash. This despite trying to buy a big DOW for trillions of dollars in debt and annual deficits approaching a trillion.
https://www.statista.com/statistics/188165/annual-gdp-growth-of-the-united-states-since-1990/
Manufacturing has been in a slow decline since the end of 2018. It had been on a steady climb from mid 2016, got a bump in early 2018 because of the tax cut, but that was temporary.
https://fred.stlouisfed.org/series/IPMAN#0
Unemployment was down nicely, but 42% of the jobs paid at or less that the minimum wage will be in a few years, $15/hr.
The pandemic just exacerbated what was really a weak, low wage economy very dependent on government spending.
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A professional gambler in Vegas could do just as well as the “predictions” of the stock market pros.
I like it when the market goes up. The value of my IRA goes with it. Future buys are not as beneficial, but the actual increase in net worth improves.
And screw you on the job I still have. I offered to work for nothing to help maintain the business I work for. Do you have the cajones to make an offer like that? Yeah, I though not.
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