Thursday, June 4, 2009

Stock Market Mirage

How can it be that a company that employs 250,000 filing for bankruptcy is actually good for the stock market and makes the DJIA rally so strongly? The easy answer is the stock market no longer reflects the economic reality on main street. [1]

Or is it that stock markets today are being used to hide the usury on Wall Street: hedge fund manipulation [2] the plunge protection team [3] tax haven secrecy [4] transfer pricing (organised balance sheet losses) [5] global monopoly capitalism, looting [6].

There's a good article by Dr Housing Bubble" on 'Stock Market Dissonance, though his national economy comparison with China is now alarmingly obsolete.

[1] Stock Market Dissonance: Why the Stock Market no Longer Reflects Main Street Economics. The Dow Jones Industrial Average. June 3rd, 2009

[2] Hedge Funds and Stock Market Manipulation. Friday, March 24, 2006

[3] Bush convenes Plunge Protection Team By Ambrose Evans-Pritchard, International Business Editor
Last Updated: 12:05am GMT 08/01/2008

[4] British Tax Haven’s Safety, Secrecy Face Brown, Obama Challenge
By Simon Clark. 16th January 2009

[5] Transfer Pricing Tax System and Its Development in China
State Administration of Taxation (.pdf)
People’s Republic of China

[6]Looting and How It Came to Pass
Naked Capitalism. 4th June 2009


BillCinSD said...

The Dr. Housing bubble link has an extra econospeak in it

Myrtle Blackwood said...

Thanks Bill. It appears to be a problem with the text editor's ability to accept long weblinks. I've shortened the link to Dr Housing Bubble's main page.

BTW, I noticed this morning an interesting co-incidence. Having just finished reading a 2006 article on the stock market that described how the financial and energy sectors were determining the stock market :

"Energy companies have recorded 50% growth in net income, while financials grew by 19%. Exclude those two groups, and net income is down 1.1%, in part due to significant dropoffs in basic materials (down 12%), consumer goods (off 11%), health care (37% lower) and technology ( down 4%), and a 13% decline in telecommunications...

About Those Earnings
David A. Gaffen
WSJ, August 25, 2006 12:02 p.m.

And then, this morning on the radio "the financial and energy sectors pushed Wall Street higher"

Australian Broadcasting Commission news at 10am, 5th June 2009

juan said...

Hi Brenda,

Can you imagine a strong decline in rate of nonfinancial profit might induce a turn towards increasingly speculative activities, and that these might become institutionalized, so bringing about a fairly self-perpetuating, long-lived form of rentier capitalism within which "the market" progressively fails to "reflect the economic reality on main street" but, instead, its own unreal reality - and not only for a few years.

Anonymous said...

With the removal of GM from the DJIA (due to its bankruptcy), one would expect the DJIA to rise (I believe the DJIA is a weighted average of the indexed companies, so jettisoning GM should cause the DJIA to rise).