Today's weaker than expected job report supposedly contributed to its 250 point drubbing. But the simple reality is that nobody knows why the market went down.
If the market had gone up today, so-called analysts would have been available to explain that the market rose because weak job market results meant that the Fed was more likely to lower interest rates than it otherwise might have been.
After all, some analyst could have argued, the risks of not cutting interest rates -- in the form of a weaker economy -- far outweigh the inflationary risks. In fact, those analysts might argue, a decelerating job market means that there is a bigger risk of deflation. And what better way to counter that risk than to cut rates?
So why didn't the market rally today? Nobody who knows the answer is talking to the media. It's safe to say that the wisdom of those who comment to the press on market movements is worth exactly what you paid for it -- nothing.
Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter.
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Reader Comments (Page 1 of 1)
9-08-2007 @ 10:47AM
HELEN Kimbrough said...
People are afraid to increase their debt. by buying new appliances cars etc. because of gas costs. We need a ceiling on gas, medicine prices and doctor visits .no one ever feels sure they can take on even necessiities they are waiting to buy because When they add up cost of gas weekly an,d car payment or new stove, fridge etc they know at least something must be squeezed out . .
9-08-2007 @ 7:20AM
Colleen said...
I am so tired of the media making this crisis even worse than it is. This article just told buyers to wait a year. So what about the poor people trying to sell their homes? With this article by Peter Cohen, he just made it worse with one stupid article. Hey media, have a little more compassion and responsibility. You just screwed more people than you helped!
9-08-2007 @ 11:16AM
Helen said...
America has the privilege of free speach. So long as comments actually ARE to the advantage of 90% of the people in our nation, we are showing love of our nation that is hard to be disputed. Being afraid to speak boldens bullies and their tactics which bring to our nation that which is undesirable.
One demonstration of my statement is Parks and lakes left by deeds for the public by our forefathers that have been taken over by individuals that were NEVER meant by the contributor to be a single recipient. Change can only come if we speak out . It is when we neglect to speak out that our children and grandchildren will suffer. More important than anything in our life ,is what we leave for the next generation. Please do not misconstrue my comments. They mean only what I say and nothing added.
9-08-2007 @ 2:24PM
Michael Schneider said...
Historically the stock market seems to worry more about recession than inflation and it is true that while most analysts like Fed rate cuts the market has often declined when the Fed starts to cut rates because of its hypersensitivity to recession. Also- the market does not really like big bad surprises very much even in the "bad news is good news" environment. The surprise job news causes people to come out and wonder if there is something seriously wrong with their sense or the sense of important policy makers like Ben Bernanke about what is happening. Comments by Alan Greenspan Friday before the market opened also helped set the stage of fear- at least what was being relayed was that he said current market conditions are like those before the 1987 crash and the 1998 LTC debacle (in what way was unclear since there are important differences). Friday's data suggested not just that rate cuts are more likely but also that the Fed may be too far behind the curve to stave off a serious economic slowdown or recession. I suspect it was an overeaction though time will tell.
Dr. Michael Schneider runs several investment oriented Web sites including http://www.Barrelomoney.com and the international site http://www.Barreloworld.com.