Tech & Biz

The Markets and Why Things are seen

by albertacowpoke | October 30, 2009 at 10:06 am

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Does anyone know what to make of the markets today? Two days ago the markets dropped based on Consumer Confidence.

Yesterday it recovered almost what it lost the day before because he White House claimed that the GDP grew by 3.5% last month. So far today the DOW is down 237 points.

Why would that be? Well let's see, simple explanations for simple people like me.

First of all the Unemployment rate is nearing 10%, the wages are flat and consumers just aren't buying since they don't have the money to consume

Some business pundits also claim that yesterday's GDP figures issued by the White House are flawed.

Some 1.6% of last months GDP growth is apparently attributable to the Cash for Clunkers program.

Markets since this recession hit seem to be responding to and hanging on to every word that gives signs of positive recovery. This of course is in the interest of those that trade stocks on behalf of their clients.

My contention is that it is best to be ignorant of the old market rules they just don.t seem to apply any longer.

For those of you that have spare money to invest, I would highly recommend to invest it into secure stocks that give a guaranteed return over 1 to 5 years. In Canada you could, in fact, place your money into a tax free savings account and return to the stock market once it stabilizes.

In Alberta, some deals are offered by the major banks and the Alberta Treasury Branch, which for the time being can yield up to 5% over 5 years. With interest rates flat this would actually increase the value of your investment beyond todays value.

There is also an Alberta Basket, which invests your money in Alberta companies and guarantees a minimum return of your original principal investment.

I'd like to hear some feedback from the economic wizards out there.

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a211423

at 10:17 on October 30th, 2009

cowpoke,

I am no where near an economic wizard, but I try and listen and learn from others, and your following statement is one that I have heard from more than one economist the past year.

old market rules they just don.t seem to apply any longer.

Therefore I am not relying solely on specific schools of economic thought for all the answers. Economic turbulence will result in new theories and formulas just as it has in the past.

albertacowpoke

at 10:24 on October 30th, 2009

a211423. I agree. The markets were spiked with high expectations prior to this economic turndown. It would seem the old statement "if it look too good to be true, it probably is"

Many have found this out in the past year. Unfortunately for many it was their retirement savings.

rng

at 10:27 on October 30th, 2009

Well said a211423, you are correct, it is a whole new rule book. That is why the neo-classicist monetarist and protectionists that post here are neither germane and their ratios and indices analysis so sorely lacking in relevance.

ACP your article is correct. Throw out the outdated market model theoretic and we have to endeavor to understand a more global, inter-dependent and integrated economic reality

a211423

at 10:32 on October 30th, 2009

The retirement funds are effected if they are retiring now or did in the last year, but the prevailing wisdom--if you can call it that!--is if you have money in the market, let it stay there and most of all don't panic. Monies in retirement funds are designed for long, slow growth anyways, so fluctuations will take place. If retirement is in ten years, then recovery is possible, perhaps less depending on how the economy evolves.

But, yes, those who had to retire lost a lot of money and its tragic. I wish they could have gotten some "bail out" money. : (

albertacowpoke

at 10:36 on October 30th, 2009

Yes a211423, I am in no way advocating that you take your money and run if you have more than 10 years remaining to retirement.

a211423

at 10:35 on October 30th, 2009

Thanks rng!

Does this make up for my poor grade in research? : )

Roy C

at 10:39 on October 30th, 2009

The market is trying to make money the old-fashioned way, by stealing it through the fraud of finding "bag-holders" who are the last suckers to buy in on the speculative wave.

The problem is that there are, in effect, no more 'insiders", given that conventional and refined conventional wisdom have both been so spectacularly wrong. So no one really knows when to get out.

Further, the markets are volatile because there is no basis for renewed hope because there is no basis for creating new real wealth. The experts know that somewhere in their psyches, singularly and collectively, but they don't want to admit to it too loudly, lest they scare the "suckers" off.

And, then, how will they make any money?