Economy

[Russell Letson]

"The economy" is not one entity but a collection of interlocking systems of production and exchange--and like William Gibson's remark about the future, its benefits and shortcomings are not evenly distributed. And as reluctant as I am to echo my Marxist friends and acquaintances, much of the maldistribution of benefits is rooted in various capitalist practices. Not, I add, in all capitalism everywhere* but in unregulated practices--moving productive capacity to the lowest-cost labor markets; allowing financial practices that add nothing to production or employment while enriching the manipulators. (Looking at all manner of venture/vulture capitalists here.)

I also wonder about the sidelining of labor unions, whether via government action (starting especially with Reagan) or cultural attitudes.

* Insofar as "captialism" is rooted in the need to concentrate resources in order to undertake productive activities, it's unavoidable. The pathologies arise from gaming the necessary rules and processes in order to skim off money from the transactions, and from a quasi-religious faith in "the markets," which are easily gamed--at least in the short run, where the fast money to be made spends just as well as the slow money of buy/build and hold. For some reason, I'm recalling my father's comments on playing craps: Don't handle the dice--there's money to be made in side bets.

[epaul]

All percentages below are top of the head guesses, but the point holds:

Maybe 20% of the stock market is "in and outers", i.e. day traders/program traders. Their market trades are short term. Time a stock, the market, catch a wave, see the trend, money in/money out. These are the current sellers.

80% of the market is institutions and pension funds. This portion of the market is long term with investments made on a schedule regardless of short-term market performance. For these investors, a dump in the market is actually positive as they get more shares per dollar invested and are ahead of the game once the market resumes its climb... a climb their steady, rain or shine, investment insures will resume.

This 80% fixed and steady investment base of institution and pension places a solid bottom to the market, a solid bottom the short term day and program traders know exists. And each trader and each computer program has an idea of when this bottom will be hit... and is dead set of getting back in the market just before it does. And as the day follows the long night, the short term money, at some point, flows back into the market. And this insures that every market bottom is just a bounce.

No comfort if you have to sell. These are the times those dog boring bonds should finally prove their worth and carry the load for awhile. If rates are going to be cut, it should be a good time to sell them.

This market advice costs nothing and is nearly worth the worth the price.

[millring]

Which is why it was at least a little comical that the same people who were raving about the booming stock market were the same ones trying to say that it was "corporate greed" and not inflation that was raising prices. And at our age almost everyone is dependent upon the market.

[Cornflake]

Well, that was short. From the Times:

Stocks Rebound After Day of Wild Selling

Wall Street traded higher on Tuesday, retracing some of the losses in the previous day’s rout. Stocks in Japan, the hardest hit by recent selling, jumped 10 percent.

Investors reclaimed a measure of calm on Tuesday, after a day of frenzied selling around the world over concerns about a potential U.S. recession, which would have ripple effects across international markets.

On Wall Street, the S&P 500 gained more than 2 percent in afternoon trading, after falling 3 percent on Monday, its sharpest daily decline since September 2022. The technology-heavy Nasdaq also posted a similarly solid gain, as the rally gained steam after a modest uptick in the morning.

Shares of the chip-making giant Nvidia, which tumbled as much as 10 percent on Monday, rose more than 6 percent. All of the major sectors in the S&P 500 were up, a reversal from broad-based declines on Monday.

“The statistics from yesterday’s sell-off had the feel of the ‘sell now, ask questions later’ kind of day where everything and anything is piling on to reasons for selling,” said Quincy Krosby, chief global strategist at LPL Financial, an investment adviser. “Today, the market by any metric is ‘oversold’ and due for a bounce.”

(The Fed still needs to lower interest rates, though.)

[epaul]

Who's to blame? A short, reasonable article.

www.cnn.com/2024/08/07/economy/blame-slumping-us-economy/index.html

[Cornflake]

Yes, it's a reasonable article.

I'm not sure the market downturn will prove to have been sufficiently significant to warrant finger-pointing. Anyway, I'm not interested in affixing blame. I just want the Fed to get it right.