Thursday, Aug 27, 2009
Green Shoots
Bloomberg: U.S. Economy Probably Contracted More Than Initially Estimated
Obviously if the economy is shrinking the US consumer will be buying, buying, buying, oh hang on. I thought everything was great and that all the numbers were pointing to a return to imminent growth. I am getting very confused by all this conflicting data - house purchases up, economic growth down, stock market up, economic growth down. WTF is going on??
Posted by bystander @ 08:11 AM (337 views) Add Comment
2 Comments
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1. symo said...
Viva la recovereh!
2. kruador said...
People who have disposable income are buggering about in the stock market (and commodities markets) as 'hedges against inflation' rather than saving it. Net inflows of 'investment'* are making prices generally go up, but it's not a sign of recovery, just that the demand for shares is greater than the supply at the moment. (Supply = actually available to buy today, demand = money actively seeking shares to buy.)
The market explanation of expectation of future profits is rubbish. Participants are playing the price speculation game, not basing their decisions on the dividends that might ultimately be paid out. (You need look no further than the Internet bubble, where most companies' business models would never, ever, have made a profit, and yet the 'market value' calculated from the price and number of outstanding shares was in billions.)
* I don't consider buying someone else's shares investment unless at the end of the chain, some money goes into buying new shares and giving that company additional capital. More often than not, at the end of the merry-go-round, someone is taking money out of the stock market system.