Last weekend, someone won the largest lottery in history. But that statement is correct only if you limit “lottery” to Powerball tickets.
Broadly speaking, the stock market is the largest lottery. That government runs both should be concerning. Evidence shows that the Mafia number rackets have better payoffs (percentage-wise) than government lotteries. If government influences the stock market, should we expect it is a fair game?
The new CPI data certainly hyped animal spirits. The Dow closed up over 1,000 points today! Other markets performed similarly. ZeroHedge used this headline to describe the results: Core CPI Slides From 40-Year-High, Real Wages Tumble For 19th Straight Month
If core inflation is leveling off, that is good news for investors. However, it may be premature to assume so. ZH cautioned:
Core CPI rose for the 29th straight month (on a MoM basis) but inched back off 40 year highs on a YoY basis, rising just +6.3% vs +6.5%
Real wages are arguably more important than inflation. No society survives when its population consistently grows poorer. “Peasants with pitchforks” did not end in the Middle Ages or in old Frankenstein movies.
Why should one believe the data provided by the BLS? It is a government agency supposed to be apolitical and honest. But is that not what we used to believe about the CIA, DOJ, FBI, and other alphabet-soup agencies?
If politicians can manipulate elections, reporting information to engineer stock market reactions should be simple. CPI data and employment numbers are easy to fudge!
I have no evidence that this is happening. However, the market reaction today seems overdone. The news juiced animal spirits! Greed always motivates. The question is whether the reaction is justified? Is the information real? Is it truthful? What is a proper response?
No one knows whether today’s market reaction was over or underdone. Time will ultimately arbitrate this debate. But large reactions can be dangerous, especially if there is little reality behind them.
We are no longer in our father’s or grandfather’s stock markets. Then you could research companies, judge their potential and invest in what you considered good ones. Monitoring markets daily or weekly was unnecessary. One evaluated portfolios annually and made adjustments then.
Today you are in a lottery. Individual companies matter less than government policies and interventions. Today was an example of this.
Today we don’t know whether our economy is growing faster or slower. We know that manipulated interest rates could be slowing. Should that even be relevant in the sense that interest rates are not market determined? We don’t know whether these interventions are useful or manipulative. It is not unreasonable to doubt whether our economy can survive without them. If you believe they cannot, then we are no longer a market economy.
Are interventions necessary for the economy or for the political class? We live in a politically manipulated world and our economy and stock market are not exempt. Image trumps substance, at least in the near term, for politicians.
Band wagons are untrustworthy, especially when engineered by non-market forces!