I like this thinking,,,,,,,This new algo driven market, nothing is real, except the fact that algo powered computers are pretty much the majority of trading activity........Things have really changed in the last few years, in the markets...
Submitted by EconMatters on 10/16/2011 01:43 -0400
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[Roubini and Krugman] By EconMatters
The whole idea of going to University and studying Economics, replete with a thorough understanding of the importance of analyzing economic data points seems to be lost on these Rock Star Economists who dominate the financial media landscape these days. The only barometer these so called economists utilize is: “Oh, the stock market has been selling off hard for two weeks we must be in a recession”!
Here is an EconMatters' quick overview on how markets work:
Investors/traders push markets up for as high as they will go, and then when they believe that the upside is pretty limited, then they sell, and shorts come in and piggy back on this selling, and both these factors serve to push markets down (this time as far down as they will go).
This occurs in markets quite regularly and when there is no long term impetus like a roaring economy, or an inflation generated asset program like QE2 in place, assets trade up and down in ranges, cycles if you will, as the business of trading takes place.
This trading volatility has very little to do with how the actual economy is performing, it is trading for the sake of trading. After all, markets could probably get by with only being open once a week, and four to six times a month ( a couple of days for important events) if it wasn`t for the business of trading.
Do you think markets need to be open 6 days a week practically 24 hours a day (with futures and currencies) from a strictly economic analysis standpoint? Well, they don`t, and this is where the whole business that has been built up around the financial markets comes into play.
The financial markets are big business, and economists need to recognize that market generated volatility needs to be largely disconnected from their analysis of the economy. It seems that some of these economists use the financial markets as their only indicator of economic health.
The reason this is problematic for economic analysis is obvious; however, the derivative fallout from this type of practice is equally troublesome. The scenario goes something like this:
http://www.zerohedge.com/contributed/pitfall-rock-star-economists?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+zerohedge%2Ffeed+%28zero+hedge+-+on+a+long+enough+timeline%2C+the+survival+rate+for+everyone+drops+to+zero%29
Realist - Everybody in America is soft, and hates conflict. The cure for this, both in politics and social life, is the same -- hardihood. Give them raw truth.
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