What's going on with the US stock market lately?
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Point is, the low interest environment the Fed is helping maintain is part of what the damaged economy needed. For years, the critics of Bernanke et al kept predicting huge inflation. Fact is, it hasn't happened over some years now, and it's what the economy needed at the time. It's typical dogmatic instead of pragmatic criticism.
A some point, yeah, the Fed'll have to transit away from easing the money supply. But the doom predictions over the last 4-5 years were obviously BS.
Actually, it lead to massive price inflation. Not CPI, but asset price inflation. This was of course precisely the objective of the policy. The question is does the FED have any business creating asset price bubbles. The jury is still out.
It's not quite that simple. Sure, a low interest rate environment is always good for the stock market, but the hope was, easier money would lead to more corporate investment and hiring. That hasn't happened nearly as much as hoped -- there are obviously other forces at work here. This all said, the housing market has bounced back somewhat and the economy is certainly more stable as well.
Inflation is not the issue, employment, income disparity and investment are, but the reasons for those don't have much to do with the Fed at this time.
Its not sustainable growth , its a low interest rate recovery.
As soon as rates rise there will be even more problems.
If i am wrong they should give bernanke a economic nobel prize ,for saving an economy with the printing press
As soon as rates rise there will be even more problems.
If i am wrong they should give bernanke a economic nobel prize ,for saving an economy with the printing press
The goals of the easy money policy were twofold - jack up the stockmarket and housing prices, creating a wealth effect that would stimulate spending. This demand would potentially incent companies to invest and hire - predictably this did not happen, because of existing overcapacity.
Second and probably even more importantly, the policy was a backdoor recapitalization of the financial institutions that were still largely insolvent coming out of the crisis. Throwing more bailout money at the banks directly was not politically feasible. Giving them "free money" which earned them a risk free risk free return of 2-3% while they absorbed more writeoffs on their mortgage portfolio was the next best alternative. Of course, risk averse net savers earning negative real interest rate on bank deposits got royally screwed in the process, but every story has a sucker.
The goals of the easy money policy were twofold - jack up the stockmarket and housing prices, creating a wealth effect that would stimulate spending. This demand would potentially incent companies to invest and hire - predictably this did not happen, because of existing overcapacity.
Second and probably even more importantly, the policy was a backdoor recapitalization of the financial institutions that were still largely insolvent coming out of the crisis. Throwing more bailout money at the banks directly was not politically feasible. Giving them "free money" which earned them a risk free risk free return of 2-3% while they absorbed more writeoffs on their mortgage portfolio was the next best alternative. Of course, risk averse net savers earning negative real interest rate on bank deposits got royally screwed in the process, but every story has a sucker.
Yes and eventually, inevitably, inflation will return. When it does it will be Bernanke's fault. Or the printing industry's. Your choice.
Tim
Not necessarily. Japan has been at this game for a decade longer than the USA and inflation is nowhere to be found. The problem in economics is you have just yesterdays models to try to explain / predict tomorrows economy. This is not an exact science subject to immutable laws.
I would say neither's fault. The policies were a reaction to an immediate catastrophe that is indicative of much deeper problems.
As an example of those, I highly recommend reading a couple of the articles in the Sunday NY times series over the last month or so on Wall Sts role in both the aluminum and believe-it-or-not, ethanol credit markets. Only reason the aluminum thing came to light is that coca cola and some the big brewing consortiums complained to the govt that they couldn't get enough material to make enough cans.
Stories of Wall Street's manipulation of markets to the gain of Wall Street and its preferred investors, and to the loss of everyone/thing else including the health of the American economy? In that case I'd say the financial markets crisis was at the very heart of the deeper problem, and while we've done a little about it, it was just enough to make a show, but not enough to really hinder the economic pirates who own Congress. We haven't done enough to prevent it from happening in that sector again, much less hinder the broad corruption that is spread across many sectors of our economy. Our 40-year old unqualified infatuation with unfettered free markets is on the verge of implosion. Love's a bitch.
Tim
For the few bold souls trying to pick a top...dumb btw in this FED induced orgasm of a market....1752 and the final qtr of 2013 still look to be a turning point. This drop again looks to be corrective and after a day or two of further rally we should drop again in a truncated C down to finish wave 4 or D on the EDT and have a final frenzy advance. Of course it cound extend by blowing out the top and have a good run up from here. Passing 1752 on big volume will probably signal a blowoff phase. A word to the wise....the Fed pumps 20 billion a week into this market,so all historical indications don't mean crap.
On a side note the chart shows all three's that fits the 2000 to present NASDQ paradigm. It also looks like a giant "crab" and also would fit into George Lindsey's pattern.
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, this is another one
If the market didn't crack in October then the seasonality takes over and is positive for November. Just way too much money out there. This market will probably march higher till the margin debt becomes unsustainable then watch out. Looks like a running 4 or bull flag,so 1825-1850 is a good target.
The DOW is representative of 30 poorly weighted stocks. Professional traders pay no attention to it; they watch the S&P 500 Index. I know that it is difficult to change old habits but if you are going to watch the markets, it would be better to watch a relevant index.
Here is an excerpt from Wikipedia:
The major difference between these two indexes is that the Dow Jones Industrial Average (DJIA) includes a price-weighted average of 30 stocks whereas the Standard & Poor's 500 (S&P 500) is a market value-weighted index of 500 stocks. The editors of the Wall Street Journal, which is owned by Dow Jones & Co, pick the stocks comprising the DJIA, while an S&P committee picks the 500 stocks in the S&P 500. (See Calculating The Dow Jones Industrial Average.)
The Dow is comprised of 30 of the largest companies in the U.S. across a range of industries except for transport and utilities. The criteria for a company to get on the Dow is vague; the companies are leaders in their industry and very large. The components in the DJIA do not change often as it takes an important change in a company for it to be removed from the index, and if the index comes up for review, the Wall Street Journal editors often replace more than one company at a time.
The S&P 500 is comprised of 500 large companies from a vast number of industries, picked based on the following criteria:
1. Market capitalization of more than $5 billion
2. Four consecutive quarters of profit determined by net income less discontinued operations and extraordinary items
3. Adequate liquidity measured by price and volume (annual dollar value traded to market cap should be at least 0.3)
4. Public float of at least 50%
The S&P 500 strives to represent all of the stocks over $5 billion by making sure the index closely matches the sector weighting that is seen in all stocks above $5 billion. For example if 20% of stocks with a market cap of over $5 billion are technology companies, the S&P 500 would try and have a technology weighting of around 20%. The S&P 500 will only include companies it determines to be operating, excluding such things as closed-end funds, holding companies, partnership and royalty trusts.
Both of these measurements are used by investors to determine the general trend of the U.S. stock market. However, the S&P 500 is more encompassing as it includes a greater sample of total U.S. stocks and because the S&P 500 is market-value weighted, it attempts to ensure that a 10% change in a $20 stock will affect the index like a 10% change in a $50 stock. The DJIA, on the other hand, is price-weighted, which means the average is affected considerably more by the large stocks within its portfolio.
Here is an excerpt from Wikipedia:
The major difference between these two indexes is that the Dow Jones Industrial Average (DJIA) includes a price-weighted average of 30 stocks whereas the Standard & Poor's 500 (S&P 500) is a market value-weighted index of 500 stocks. The editors of the Wall Street Journal, which is owned by Dow Jones & Co, pick the stocks comprising the DJIA, while an S&P committee picks the 500 stocks in the S&P 500. (See Calculating The Dow Jones Industrial Average.)
The Dow is comprised of 30 of the largest companies in the U.S. across a range of industries except for transport and utilities. The criteria for a company to get on the Dow is vague; the companies are leaders in their industry and very large. The components in the DJIA do not change often as it takes an important change in a company for it to be removed from the index, and if the index comes up for review, the Wall Street Journal editors often replace more than one company at a time.
The S&P 500 is comprised of 500 large companies from a vast number of industries, picked based on the following criteria:
1. Market capitalization of more than $5 billion
2. Four consecutive quarters of profit determined by net income less discontinued operations and extraordinary items
3. Adequate liquidity measured by price and volume (annual dollar value traded to market cap should be at least 0.3)
4. Public float of at least 50%
The S&P 500 strives to represent all of the stocks over $5 billion by making sure the index closely matches the sector weighting that is seen in all stocks above $5 billion. For example if 20% of stocks with a market cap of over $5 billion are technology companies, the S&P 500 would try and have a technology weighting of around 20%. The S&P 500 will only include companies it determines to be operating, excluding such things as closed-end funds, holding companies, partnership and royalty trusts.
Both of these measurements are used by investors to determine the general trend of the U.S. stock market. However, the S&P 500 is more encompassing as it includes a greater sample of total U.S. stocks and because the S&P 500 is market-value weighted, it attempts to ensure that a 10% change in a $20 stock will affect the index like a 10% change in a $50 stock. The DJIA, on the other hand, is price-weighted, which means the average is affected considerably more by the large stocks within its portfolio.
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