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Why did the DOW gain 889 points today?

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  • #31
    I think there is a significant probability of deflation too.

    This would be a function of the money supply shrinking as credit (and thus the money multiplier) reduces due to excess risk aversion.

    In this case, dropping the fed funds rate will have the same effect as pushing on a rope.
    12-17-10 Mohamed Bouazizi NEVER FORGET
    Stadtluft Macht Frei
    Killing it is the new killing it
    Ultima Ratio Regum

    Comment

    • #32
      Originally posted by KrazyHorse
      I think there is a significant probability of deflation too.

      This would be a function of the money supply shrinking as credit (and thus the money multiplier) reduces due to excess risk aversion.

      In this case, dropping the fed funds rate will have the same effect as pushing on a rope.
      Right, and without analysing the data, seeing the fed make a drastic cut like they are expected to makes me think that they also believe in a high probability of deflation.
      I drank beer. I like beer. I still like beer. ... Do you like beer Senator?
      - Justice Brett Kavanaugh

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      • #33
        Originally posted by Jon Miller
        I think right now we are seeing a lot of gambling

        JM

        I thought that's how stock investments usually operate.
        A lot of Republicans are not racist, but a lot of racists are Republican.

        Comment

        • #34
          Originally posted by KrazyHorse
          The really interesting story today was Volvo. That's where a specific mechanism was active in moving prices, which for a time made Volvo the largest company in the world.
          You mean Volkswagen. Indeed, that was an interesting and funny story that could, in part, move markets.

          But the story of bigger magnitude that I have been focusing on is the unwinding of the Yen-Dollar and Yen-Euro carry trade. Yesterday, the Dollar increased 7% versus the Yen. The Euro increased 10% versus the Yen -- truly enormous moves. There was a rumor that the Japanese central bank would lower Japanese interest rates and/or start paying interest on reserves to Japanese banks.

          Both of these stories are related to investors getting squeezed out of their investments. In the case of VW, it was hedge funds getting caught in a short squeeze. In the case of the carry trade, it may have been relief after positions were successfully unwound.
          I came upon a barroom full of bad Salon pictures in which men with hats on the backs of their heads were wolfing food from a counter. It was the institution of the "free lunch" I had struck. You paid for a drink and got as much as you wanted to eat. For something less than a rupee a day a man can feed himself sumptuously in San Francisco, even though he be a bankrupt. Remember this if ever you are stranded in these parts. ~ Rudyard Kipling, 1891

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          • #35
            Originally posted by DanS


            You mean Volkswagen.
            Damn Swedes look like Germans.
            12-17-10 Mohamed Bouazizi NEVER FORGET
            Stadtluft Macht Frei
            Killing it is the new killing it
            Ultima Ratio Regum

            Comment

            • #36
              It was fun to watch. Never seen anything quite like it.

              I wonder how much Porsche will be able to pocket because of this, and who is left holding the bag.
              I came upon a barroom full of bad Salon pictures in which men with hats on the backs of their heads were wolfing food from a counter. It was the institution of the "free lunch" I had struck. You paid for a drink and got as much as you wanted to eat. For something less than a rupee a day a man can feed himself sumptuously in San Francisco, even though he be a bankrupt. Remember this if ever you are stranded in these parts. ~ Rudyard Kipling, 1891

              Comment

              • #37
                Krazy, did you change professions, or did you just decide to take up something even more convoluted than physics for a hobby?
                No, I did not steal that from somebody on Something Awful.

                Comment

                • #38
                  probably manipulation.

                  Top % gains of the dow:
                  03/15/1933 62.10 8.26 15.34
                  10/06/1931 99.34 12.86 14.87
                  10/30/1929 258.47 28.40 12.34
                  10/28/2008 9065.12 889.35 11.88
                  09/21/1932 75.16 7.57 11.36
                  10/13/2008 9387.61 936.42 11.08
                  10/21/1987 2027.85 186.84 10.15
                  08/03/1932 58.22 5.06 9.52
                  02/11/1932 78.60 6.80 9.47
                  11/14/1929 217.28 18.59 9.36

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                  • #39
                    Originally posted by KrazyHorse
                    I think there is a significant probability of deflation too.

                    This would be a function of the money supply shrinking as credit (and thus the money multiplier) reduces due to excess risk aversion.

                    In this case, dropping the fed funds rate will have the same effect as pushing on a rope.
                    Honestly, falling consumer demand and falling commodity prices will have more to do with the coming deflation.
                    "The purpose of studying economics is not to acquire a set of ready-made answers to economic questions, but to learn how to avoid being deceived by economists."
                    -Joan Robinson

                    Comment

                    • #40
                      Originally posted by The Mad Monk
                      Krazy, did you change professions, or did you just decide to take up something even more convoluted than physics for a hobby?
                      Quant finance = backup plan. Or at least it was until all the IBs went out of business. Though it looks like most of the hedge funds are running strong.
                      12-17-10 Mohamed Bouazizi NEVER FORGET
                      Stadtluft Macht Frei
                      Killing it is the new killing it
                      Ultima Ratio Regum

                      Comment

                      • #41
                        Originally posted by KrazyHorse


                        Quant finance = backup plan. Or at least it was until all the IBs went out of business. Though it looks like most of the hedge funds are running strong.
                        I suspect that won't remain true for very long. People are already pulling out money, which forces them to sell assets in today's depressed market.
                        "The purpose of studying economics is not to acquire a set of ready-made answers to economic questions, but to learn how to avoid being deceived by economists."
                        -Joan Robinson

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                        • #42
                          No offence, but I suspect you're talking out of your ass.
                          12-17-10 Mohamed Bouazizi NEVER FORGET
                          Stadtluft Macht Frei
                          Killing it is the new killing it
                          Ultima Ratio Regum

                          Comment

                          • #43
                            Originally posted by KrazyHorse
                            No offence, but I suspect you're talking out of your ass.
                            Time will tell. I doubt there will be much money to be made in the stock market in the short-run.
                            "The purpose of studying economics is not to acquire a set of ready-made answers to economic questions, but to learn how to avoid being deceived by economists."
                            -Joan Robinson

                            Comment

                            • #44
                              Why not? If anything, increased volatility means a greater equity premium.
                              12-17-10 Mohamed Bouazizi NEVER FORGET
                              Stadtluft Macht Frei
                              Killing it is the new killing it
                              Ultima Ratio Regum

                              Comment

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