Source:Â Wikimedia
Dear Diary,
The Dow shot up 226 points yesterday, or 1.3%. A good turnaround.
We don’t know whether US stock prices are going up or down. They usually go up and down. But we suspect they are going up and down even more. From Bloomberg:
Equities trading has become more volatile amid signs that the plunging price of crude and a stronger dollar are eroding corporate profits.
The S&P 500 dropped 1.4% Wednesday, bringing its slide this month to 2.8%, the most since January 2014. The Chicago Board Options Exchange Volatility Index jumped 32% in the previous two days, its biggest gain in almost seven weeks.
A Moment of Pause
The Fed is no longer buying bonds to prop up financial assets. It doesn’t have to. The Europeans and Japanese are on the case.
Between them, they’re set to pump the equivalent of $1.5 trillion into financial markets in 2015.
Why? Never mind. It’s all nonsense. But it is not without real-world consequences – some foreseeable and others not.
And here a moment of pause is appropriate.
We take our cap off to Mr. Market and salute him. There must be 100,000 full-time economic and financial analysts in the world. They are all watching, studying and forecasting. But how many saw the price of oil falling below $50?
Almost none. It was just unthinkable.
Three years ago, industry analysts proclaimed we would “never see $50 oil again in our lifetimes.†Here at the Diary, we believed them.
And here it is: sub-$50 oil.
And here’s another one: Who saw the ECB picking up the Fed’s QE burden?
Well, quite a few people, probably… even we saw that part of it.
But as you’ll recall, the Fed telegraphed its “taper.†Gradually it would take its monthly buying of bonds to zero. This would remove about $1 trillion in buying power from the bond market.
Many members of the commentariat predicted trouble – including us. How could you take the largest bidder out of a market and not expect prices to fall?
