Easy Money, Evermore: The Robo-Traders Erupt

So yesterday the stock market sold off on fears that the global economy still sucks and that the IMF noticed. Germany had released some pretty bad economic numbers during European trading and as the US market opened the IMF piled on by reducing their global growth estimate for 2014. Of course the German industrial output number wasn’t just pretty bad; it was downright awful, down 4%, the biggest fall in 5 years.

And since the IMF downgraded their estimate all the way from 3.4% to 3.3% and they also happen to be about the most clueless international economic organization around – a truly impressive feat considering the competition for cluelessness among government economic bureaucrats – I’m going to guess the German economic shocker probably had a bigger impact on stocks yesterday. Or hell, who knows with this market; maybe some Fed member raised the wrong eyebrow or something.

So at the close yesterday there was all kinds of hyperventilating on bubblevision about the HUGE DOWN DAY ON WALL STREET!!!! amid talk of bear markets and moving averages and trend lines, oh my! No one seemed to notice or mention that the S&P 500 was down all of about 4% from its all time high and that when the Dow is at nearly 17,000, a 270 point day is, well, not much to get worked up about. Of course, the rest of the stock market isn’t nearly as healthy as the S&P and the NASDAQ appear to be so maybe some angst is warranted. But you would have thought the market had done an ’87 the way it got reported.

Anywho, today, the stock market gained back all it lost yesterday because the Fed released the minutes of its last happy hour..er…FOMC meeting and lo and behold it appears that some members of the committee have actually been paying attention and expressed some concern that maybe with the rest of the global economy slowly going tits up, that maybe that might have an effect on the US economy. And hey look at that, the dollar is going straight up and oil is going straight down and you know inflation might not be such a problem after all. Now if you’re wondering why the market would sell off one day when a quasi-governmental organization says the global economy is not doing so great and rally the next when a different quasi-government agency says the same thing, well you are obviously too rational to be trading this market.

Now I know what you’re thinking. That one of those organizations is essentially a toothless institution with little ability to actually influence the global economy while the other one has the power to….um….well, create bank reserves. Not that bank reserves really have anything to do with the stock market or the global economy but hey when that’s all you’ve got left in the toolbox that’s what you use. And apparently actual economic effectiveness isn’t required to get the bulls to punching that buy button with abandon anyway. Because what the Fed said isn’t really important anyway. What’s important is what the market thinks the Fed said and what they heard today was EASY MONEY, EASY MONEY, MORE QE, WE AREN’T EVER RAISING RATES, BUY STOCKS, WE’VE GOT YOUR BACK. Or something like that.

I’m just going to go ahead and declare this now. It’s time to acknowledge that this stock market has officially lost its collective mind. It’s time to put away the sharp objects on the trading floors and slowly back away before someone gets hurt. All you folks out there who think markets are always rational and actually provide some kind of useful information about the economy need to get a grip. All this market is saying is aasdjfkl;asdfjklas;dfjkals;dff and I defy any of you mathematician wannabe econometricians to model that gibberish.

     

David Stockman's Contra Corner is the only place where mainstream delusions and cant about the Warfare State, the Bailout State, Bubble Finance and Beltway Banditry are ripped, refuted and rebuked. Subscribe now to receive David Stockman’s latest posts by email each day as well as his model portfolio, Lee Adler’s Daily Data Dive and David’s personally curated insights and analysis from leading contrarian thinkers.

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