Jun 13, 2013

Morning Madness; The Sky is Falling

Grab your bugout bag, we are doomed.

Global Shares Pummeled Dollar Slumps as Rout Gathers Pace

Reuters says stocks are Down this week after having been Up all year long so woe is me. The writer is to be commended for exceptional word choice. In a world where even the dullest list of numbers must convey drama, "Pummeled" and "Slumps" are exquisite verbs, but their magic is overtopped by the ultimate horror of a noun. "Rout." (!)

Cue the teevee footage. Grainy old black and white film of American bread lines in 1931. Starving babies in1969 Biafra.  Malnourished Chinese peasants any time from 2,000 B.C. to yesterday. This is it, folks.

So, what happened?

People who trade stocks for a living decided to sell a few of the stocks they have been buying since 2009. They're pocketing some of the cash they've made. It is not much different from you taking a look at that  extra Glock you bought during the Bush reign and deciding a $200 profit on a $400  investment is plenty. Sell that puppy.  If enough people do it, of course, the later sellers will make less money. The headline would read "Glock Crap Pummeled Plastic Melts in Teutonic Brick Rout."  

The actual pistols don't change  (nor does the health of Glockenmakers). They go bang today in whatever caliber they used yesterday.  Sort of like Pfizer (PFE, NYSE, $28.38 premarket, down about 1 per cent in three days), maker of Viagra.  The market isn't saying Viagra won't work anymore. At worst it's saying that profits of the pill may not be as big as they thought yesterday, even though old goats will still keep popping for them, even at $20 a pop.

(A certain economic nostalgia comes to mind, recollection of a time when, I'm told, a double sawbuck would buy it all -- a pound of raw  hamburger, two vitamin E tabs, a half-ounce of rhino horn, plus an evening of professional services. And the old dude didn't even have to worry about the dreaded four-hour buzzer. But I digress.)

It is normal to wonder why all the traders' opinions changed so fast, and here Reuters helps us out:

"...there has never been a period when the Fed has started to take back stimulus that has left the markets untouched," said Hans Peterson, global head of investment strategy at Swedish bank SEB. "And this time it is a bigger exercise. We have moved markets from 2009 to 2013 on stimulus and now we are trying to take a step into a world which is more driven by natural growth. That transition will not be easy."

Or: Traders and investors like to trade and invest with Santa Claus money. They're afraid Chairman Bernanke is about to shave off his beard. He won't, of course, but the market panics merely at any hint  he might trim it by one or two basis points.

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