Tuesday, May 30, 2006

Hark! The cause of all our volatility!

I am always amused by financial columnists who ascribe such iron-clad causality to up or down markets. Today the market (a conglomeration of millions of participants each with variate wants, desires, needs for hedging, etc.) according to the AP was:

"Higher oil prices and sliding consumer confidence sent stocks plunging Tuesday as a weak sales report from Wal-Mart Stores Inc. raised concerns about discretionary spending. The Dow Jones industrial skidded almost 185 points."

"Ex post hoc, ergo propter hoc" can only be repeated so many times...

Anyway, the volatility continues. Hank Paulson today was appointed in what appears to be a blatant attempt to increase "brand U.S.A." and the good old american $. The dollar has been "declining" (against the Euro anyway) which reflects just how bad some think the prospects for U.S. stocks are...but again, it only takes one global scare for the herd to pile into U.S. $ denominated assets...

This "correction" (the dumbest term in finance...do declining prices "correct" a "wrong" market? that would imply knowledge of "true" asset values, which is what the market does continuously anyway. Stupid choice of word.) will last for a bit then I expect the S&P to rebound for the remainder of the year.

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