Pick the logic out of this then

First, as I have long argued, markets have realised that stocks were horribly over-valued, come what may. That bubble has burst. The disconnect between real markets that were going nowhere and stock markets marching inexorably upwards has been broken. That needed to happen. The timing and the speed have both been brutal, but it was overdue. QE and the thinking of the pension sector – in turn driven by inappropriate regulation and the economic myth that it is actually possible for whole generations to save for their retirement when that is not true, because only real investment activity can achieve that goal, and savings and investments in this sense are almost entirely unrelated – have led to vast amounts of money seeking a home in the stock market, which has at the same time restricted the supply of available shares to buy. The result was a bubble, pure hype, and now a crash to which we have not as yet seen the end.

But, second, coronavirus is already going to hurt. Trade events and shows are not happening. Sporting events likewise. People are already losing money. In my own hobby, a big show scheduled for April is incredibly unlikely to happen. That’s a massive deal for the traders who were going to be there. It’s maybe an even bigger deal for the venue, the caterers and all their staff. The real losses are already happening. And whatever happens this will get worse as attempts to avoid risk grow amongst people at large. Of course, that isolation might just work for coronavirus. But the traders may not recover. And their employees are already in trouble.

New information arrives concerning the economy. A pandemic means that economic activity will be lower. Investment markets fall as a result.

This shows that markets don’t react to changes in information. That the efficient markets hypothesis is wrong in fact.

Sigh.

18 thoughts on “Pick the logic out of this then”

  1. “In my own hobby, a big show scheduled for April is incredibly unlikely to happen.”

    I’m trying to work out what hobby he’s referring to. Dachau historical re-enactments? This thing he has going with Rocco, Diane Abbott & the donkey? There’s not an Ely Festival of Pornography, is there? I thought that was at Oakham.

  2. “New information arrives concerning the economy. A pandemic means that economic activity will be lower. Investment markets fall as a result.

    This shows that markets don’t react to changes in information. That the efficient markets hypothesis is wrong in fact.”

    To be fair, not much new information came out in the last couple of days that was not entirely predictable from a few weeks earlier so I’m not sure the way the information has been processed by the markets has been genuinely efficient. Presumably it is the assessment of the economic damage or the possible panic effect which changed.

  3. The real game changer has been the Saudis turning on the oil taps in response to lower demand for oil. That in itself has real consequences for the US frackers trying to refinance their debt which is already below junk quality. Prior to that you could see gradual adjustments happening because of the Chinese slowdown. But we won’t see the actual impact of that for a few months while inventories get used up.

    But I have read Spud’s rant and it sounds as if it were dictated by his amorous donkey. Take a few facts that have little basis in reality, force them into a pattern that makes no sense and derive conclusions. You might as well throw in climate exhaustion or something in addition. The result is as meaningful as trying to guess Dianne Abbot’s weight from inspecting her stools. I imagine Spud is familiar with them because of the enemas on the Rocco shoots

  4. I think Snippa is referring to this model railway event in Peterborough on the first weekend of April.
    https://www.nationalgardenrailwayshow.org.uk/
    There might be a cheeky opportunity to hire a stand at short notice if an exhibitor pulls out. Handing out free Fayre Tax Marks or something if you can show your return.
    But if Snippa says it will be called off, it will likely be on. Imv, of course

  5. The economics of Trump have ruined the Global Economy. He is a right wing racist. He has cut taxes for the rich, and cut spending for the public services for the poor. People say I am creepy, but what about him?

  6. I bet Rishi Sunak and Steve Barclay are reading that blog and thinking ‘Give that man a role in combatting the crisis’

    Cometh the hour, cometh the Potato

  7. the economic myth that it is actually possible for whole generations to save for their retirement

    Really? Who else is going to do it then?

  8. QE and the thinking of the pension sector – in turn driven by inappropriate regulation and the economic myth that it is actually possible for whole generations to save for their retirement when that is not true, because only real investment activity can achieve that goal, and savings and investments in this sense are almost entirely unrelated Eh?? Wut?

  9. “the economic myth that it is actually possible for whole generations to save for their retirement”

    But it isn’t whole generations, is it? It’s the portion employed in the private sector. The public sector’s non-funded pensions get paid out of taxes at the same time (or earlier) as the private sector pensioners. So they’re paying for them through their taxes

  10. I need the mind bleach – just had a vision of the Hippo pulling a train, with a donkey-shaped caboose… Rocco has some weird customers!

  11. “He is a right wing racist.”

    Citation needed.

    “He has cut taxes for the rich”

    Cause only the rich pay taxes.

    “and cut spending for the public services for the poor.”

    Citation needed.

  12. @Tim W, Richard

    Quotes difficult to read

    Please remove italic from quotes, and stop removing line breaks

  13. Hmmm . . . post I replied to disappeared.

    Seems we have a new batch of Leftard trolls visiting the site. Timing and content suggest 1 writer using different names.

    This will be fun!

  14. bloke in spain said:
    “I’m trying to work out what hobby he’s referring to. Dachau historical re-enactments?”

    This one, I would guess:
    https://yorkshow.org.uk/
    The York Model Railway Society, Easter weekend.

    He’s one of those people whose hobby really isn’t surprising, given their character. He seems to think he can control the economy – and all of us – like he runs his model railway.

Leave a Reply

Your email address will not be published. Required fields are marked *