So you'll see on Marketwatch, Y! Finance, Motley Fool and others about how the president's comments caused the market to drop. This is rubbish.
No, this is rubbish. When the government seeks to regulate huge profit-makers at banks, it's completely rational for those banks' values to fall. This is the consensus view of bullish and bearish commentators alike, and I have no idea why anyone would disagree. The blogger points out that commodities fell harder. That and a nickel and a time machine will get you a cup of coffee.
And those pundits who thought there was some correlation between politics and markets disappeared.
No they didn't, and the rally has been extremely political. I hate linking this over and over, but it needs to be understood. There is a near-perfect inverse correlation between the value of the dollar and the market:
You can creepily see this happening on a tick-by-tick basis. I don't know why this is so perfect, but I suspect it almost has to be algos doing it. This is the kind of thing that the government (may) start regulating.
When the government seeks to regulate huge profit-makers at banks, it's completely rational for those banks' values to fall.
You're assuming markets are rational, and that the short term change in market structure was directly caused by a speech.
Again, the point I was trying to make was not that the sentiment due to the speech had shifted, but that the analysis by the WSJ was very politicized and intellectually dishonest.
The blogger points out that commodities fell harder. That and a nickel and a time machine will get you a cup of coffee.
And the real question then is, did the overall markets fall because of Obama's comments, or because of dollar strength and the widening of Greek CDS spreads? Since materials have a higher weighting in the market, would we not assume the latter?
There is a near-perfect inverse correlation between the value of the dollar and the market
That correlation started around 2H2008. Correlation running about -.5... nowhere near perfect; however, historically we have a positive correlation. Source: http://bit.ly/spycorr The liquidity infusions that the market has seen has very little to do with U.S. politics.
You can creepily see this happening on a tick-by-tick basis. I don't know why this is so perfect, but I suspect it almost has to be algos doing it. This is the kind of thing that the government (may) start regulating.
This happens due to capital inflows/outflows from different markets. If capital flows out of bonds, it most likely goes into stocks, which gives us this "creepy" movement... but there's nothing sinister behind it. Algorithmic trading has little to do with this, if at all.
One quick note: UUP is probably the worst tracker of dollar strength. It's an etf that is structurally damaged and has contract rollover issues due to it's exposure in front month dollar future contracts. I would suggest DXY or looking at a basket of currencies.
I use it as an example because it's actively traded.
If capital flows out of bonds, it most likely goes into stocks
Pass the bong. What's been going on is simple: Bernanke has been scuttling the dollar in order to force people into all forms of risk. Money has been going to bonds and stocks both, the riskier the better:
No, this is rubbish. When the government seeks to regulate huge profit-makers at banks, it's completely rational for those banks' values to fall. This is the consensus view of bullish and bearish commentators alike, and I have no idea why anyone would disagree. The blogger points out that commodities fell harder. That and a nickel and a time machine will get you a cup of coffee.
Short term noise in the market happens.
A five percent haircut is not "noise". http://www.google.com/finance?chdnp=1&chdd=1&chds=1&...
And those pundits who thought there was some correlation between politics and markets disappeared.
No they didn't, and the rally has been extremely political. I hate linking this over and over, but it needs to be understood. There is a near-perfect inverse correlation between the value of the dollar and the market:
http://www.google.com/finance?chdnp=1&chdd=1&chds=1&...
You can creepily see this happening on a tick-by-tick basis. I don't know why this is so perfect, but I suspect it almost has to be algos doing it. This is the kind of thing that the government (may) start regulating.
http://www.google.com/finance?chdnp=1&chdd=1&chds=1&... [<-- jan 22 2010]
This is not historical:
http://www.google.com/finance?chdnp=1&chdd=1&chds=1&...