Bending the Third Rail
Because We Should, We Can, We Do
Thursday, October 26, 2006
Stock Market Wankers
The stock market is, despite conventional wisdom, one of the most inefficient measures of reality. The story on the housing slowdown is "the" business story of the day. Yet the stock market analyst has this to say on the Yahoo opening page:
Absent a convincing means to more aggressively lift stocks higher earlier, further deterioration in oil prices is finally acting as an incentive for buyers to keep the rally going. Crude oil is now down 2.0% at $60.15/bbl, losing ground in sympathy with a sell-off in natural gas futures.
So, the relatively obscure and minor changes in oil prices are driving the market with $60 oil looking good?

The U.S. gross domestic product is made up primarily of consumer spending. Put another way, two-thirds of all economic activity is composed of the consumer spending money blithely, usually on credit. A big news story that may compromise that component of the economy breaks, and the stock market still moves to the positive side.

When this kind of irrational activity reaches it's peak, the market's short-term bull run is over. We're not there yet, but we will be in the not too distant future. Then, even in the face of some good economic results, the market will fall and you won't be able to give stocks away.
Written at 11:24 AM by Greyhair.
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