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I wish that the media would break it's habit of assuming that an upwards movement in the stock market indices acts as anything like an effective judgement of a

I wish that the media would break it's habit of assuming that an upwards movement in the stock market indices acts as anything like an effective judgement of a government program/policy. Wall Street wasn't able to accurately digest the seriousness of the housing bubble crash until it was too late, what's any different this time around?

CWuestefeld 17y ago
I think you misapprehend what the market tells us. People invest in the market in order make money: if they expect that there's a greater amount of money to be made they'll invest more; if the amount to be made is lower, they invest less. If people are trying to get into the market (i.e., they think more money is to be made), prices rise; if the opposite, prices go down. So the movement of the market doesn't tell us that anything is "good" or "bad", it can only tell us if investors believe that it will lead to an increase or decrease of investment income. In the case of the USA, it should be obvious that the government pumping billions of dollars into businesses (banks, GM, Chrysler, etc.) will lead to people invested in those business getting more income, so prices of those investments rises. That is despite the fact that this money is earned (after the final accounting) on the backs of taxpayers that aren't invested. Thus, the bailout is a transfer of wealth from the poor to the rich. That said, the markets are hugely chaotic. Anybody who thinks he can say that a market movement is due to one particular piece of news is talking out of his butt. The market is a huge, distributed computer. When it's reasonable to believe that a single piece of news is so significant that everything else is just noise, then maybe we can guess. But the normal day-to-day news reports that attribute gains and losses to specific news items are pipe dreams.
- roc 17y ago
  > "it can only tell us if investors believe that it will lead to an increase or decrease of investment income." I think that's rather his point. It's well-understood here that movement in the market is but a tiny window into a huge range of financial bets. But the overwhelming majority of financial reporting perpetuates the myth that the window is providing a value judgment on the economic impact a particular action. E.g. We know an uptick following a bailout is as likely caused by a desire to cash in on a sucker's rally as by optimism about long-term value. But articles such as the above link persist in suggesting that the uptick means the bailout is good, or helpful, or assuages actual concerns.
  - CWuestefeld 17y ago
    Upvoted - good criticism of my criticism. My reading was concentrating more on the "good or bad" part, rather than what area they're attributing the area to.

CWuestefeld 17y ago

I think you misapprehend what the market tells us. People invest in the market in order make money: if they expect that there's a greater amount of money to be made they'll invest more; if the amount to be made is lower, they invest less. If people are trying to get into the market (i.e., they think more money is to be made), prices rise; if the opposite, prices go down. So the movement of the market doesn't tell us that anything is "good" or "bad", it can only tell us if investors believe that it will lead to an increase or decrease of investment income. In the case of the USA, it should be obvious that the government pumping billions of dollars into businesses (banks, GM, Chrysler, etc.) will lead to people invested in those business getting more income, so prices of those investments rises. That is despite the fact that this money is earned (after the final accounting) on the backs of taxpayers that aren't invested. Thus, the bailout is a transfer of wealth from the poor to the rich. That said, the markets are hugely chaotic. Anybody who thinks he can say that a market movement is due to one particular piece of news is talking out of his butt. The market is a huge, distributed computer. When it's reasonable to believe that a single piece of news is so significant that everything else is just noise, then maybe we can guess. But the normal day-to-day news reports that attribute gains and losses to specific news items are pipe dreams.

roc 17y ago
> "it can only tell us if investors believe that it will lead to an increase or decrease of investment income." I think that's rather his point. It's well-understood here that movement in the market is but a tiny window into a huge range of financial bets. But the overwhelming majority of financial reporting perpetuates the myth that the window is providing a value judgment on the economic impact a particular action. E.g. We know an uptick following a bailout is as likely caused by a desire to cash in on a sucker's rally as by optimism about long-term value. But articles such as the above link persist in suggesting that the uptick means the bailout is good, or helpful, or assuages actual concerns.
- CWuestefeld 17y ago
  Upvoted - good criticism of my criticism. My reading was concentrating more on the "good or bad" part, rather than what area they're attributing the area to.