I am a theoretical physicist and currently Director of 
June 10, 2011
God and the stock market
In this article in the New York Times, one paragraph jumped out at me because it touched a nerve.
"On the one hand the markets want a deal," said Howard Gleckman, an editor and analyst at the Tax Policy Center, a joint effort of two centrist research organizations, the Urban Institute and the Brookings Institution. "On the other they don't want a deal that's going to send the economy back into recession."
I find it really annoying when people speak so glibly about what 'the markets' want and don't want. How could they possibly know? The stock markets involve millions of people trading billions of shares each day for all manner of reasons. The idea that one can look at the behavior of stock market indices and deduce what is causing it to behave in a particular way is ludicrous except in the case of major events (like the financial collapse) in which case almost anyone can assign cause without being a Wall Street market 'expert'. And yet these people do it on a daily, or even hourly, basis.
Bob Garfield of the radio show On The Media had a droll piece on this glib single factor analysis. (Note: The audio is wrong and different from the transcript. To hear the seven minutes audio report, click on the link below, and begin at the 24:50 minute mark.)
The way these analysts speak so confidently about something they cannot possibly know reminds me strongly of theologians who also speak confidently about the properties of god and what he wants, even though they have no idea either. The way that politicians try so hard to propitiate 'the market' by doing things that will raise the stock indices also reminds me of the way that religious people try to do things to please their inscrutable gods.
Comments
Well, this kind of idiotic "analysis" won't be an entirely bad thing if it brings pressure on the politicians to stop with the debt brinksmanship and austerity craziness and do something to jump-start the economy. Because the FSM knows they pay a heck of a lot more attention to the Dow than to the unemployment rate.
I thought it was interesting that you brought up theologists, because that is the first thought that jumped into my head too. I could be a so-called "Wall Street expert" with a little research.
Steve,
The catch is while it is true that the government responds to the market, what is good for the market is not necessarily good for ordinary people but mainly good for the oligarchy.
For example, full employment is not good for stock prices since that leads to higher wage costs and lower profits. This may be why very little is being done about the high unemployment levels that seem to becoming permanent.
@Steve and Mano
I'm not sure an economy based on debt and consumption is sustainable over time regardless of how markets are regulated or how many jobs are credited. If you haven't heard of the Venus Project it might be worth a look.
http://gharrhome.wordpress.com/2011/02/03/not-basing-your-society-around-money/
Quote:
The Venus Project has no government, laws, armies, shops or money. People get supplied all the basics they need from supply points for free, and anything extra is not considered as property that you own. Thus if item is not being used, it can simply be checked back into the supply system for example.
End quote.
At the heart of that is the idea of shared consumption. Why does everyone on your street have a lawnmower when it's only used a few times a week? Why not have 1 lawnmower shared by 20 household? Suddenly? Consumption (number of lawnmowers purchased) drops drastically. We use this model with books so why not grow that model. Bike sharing is becoming popular and some libraries even loan out toys.
Sorry for the extended comment. It's just on some level I think 'the markets' in themselves are part of the problem.
Really good read. I hate people who generalize on what the market wants or doesn't want. Its totally absurd.
I have seen Peoples refering intraday minor movements of stocks as bullish and bearish trend.Analysts are always biased no one is giving the correct market view.
Some analysts force their opinion on other people, just in a hope to sell off their stock holdings for good rate.