Sequester hits the Dow

[takoma]

On the Day of Sequestration, the Dow closed at 14,090, the highest it has closed since 2007, and only about half a percent short of the all-time record high closing. Does that mean investors think sequestration is a good thing? Or will the news hit on Monday?

[Anonymous]

I think it means that the market expects that Congress will eventually do something.

[Anonymous]

IMO sequester is priced in already.

Since the last high in 2007, Corporate earnings have grown 65%, p/e multiple for the entire equity market is much smaller than what models show it should be right now.

[takoma]

Anonymous wrote:IMO sequester is priced in already.

Since the last high in 2007, Corporate earnings have grown 65%, p/e multiple for the entire equity market is much smaller than what models show it should be right now.

Maybe the market has priced in government gridlock. They figure only spending will get us out of this slump, and if the gov won't do it, perhaps the market will.

[takoma]

Or maybe the market recalls Jerome Kern's song "Yesterdays", which contains the line "Days I knew as happy sweet sequestered days".

[Anonymous]

The stock market has nothing to do with the health of the country/economy. The vast majority of the trades are done by computers looking for short term gains(that can be measured in factions of second).

[Anonymous]

Market is shrugging at sequester. Sequester really isn't that big a deal from a macroeconomic standpoint. It will be painful in some quarters, but not overall. It's like $44 billion in outlays over the rest of the fiscal year, in a $3.7 trillion economy. It's not even a cut in absolute terms, just a reduction in growth.

PP is also right -- quant trading dominates all.

[takoma]

Anonymous wrote:The stock market has nothing to do with the health of the country/economy. The vast majority of the trades are done by computers looking for short term gains(that can be measured in factions of second).

But when you a looking at a situation as momentous as the Sequester, and hours between the time that it became clear there would be no rescue and the close of the market, the people controlling those programs had plenty of time to intervene. However, I do nt disagree that those people might see gain for the stocks even though joblessness will increase and other aspects of the economic situation will deteriorate.

[Anonymous]

Anonymous wrote:The stock market has nothing to do with the health of the country/economy. The vast majority of the trades are done by computers looking for short term gains(that can be measured in factions of second).

That's not true. If it was, the market would not rise and fall with political and economic events. People may agree or disagree as to the meaning of the market's closing price on Friday. And we can argue about whether the market's reaction is correct or incorrect.

But it is inarguable that the market responds to political and economic events.

[Anonymous]

Anonymous wrote:Market is shrugging at sequester. Sequester really isn't that big a deal from a macroeconomic standpoint. It will be painful in some quarters, but not overall. It's like $44 billion in outlays over the rest of the fiscal year, in a $3.7 trillion economy. It's not even a cut in absolute terms, just a reduction in growth.

PP is also right -- quant trading dominates all.

The market will respond as the effects of the sequester take hold across the next few months. Nothing was going fall apart on Friday. The sequester will be slow and painful and will trickle down to many sectors - by summer time, we'll see the impact in the markets pretty clearly.

[Anonymous]

The market responded in 2011:

http://www.dcurbanmom.com/jforum/posts/list/180515.page

i think that the market does not believe the sequester will not be resolved.

[Anonymous]

takoma wrote:On the Day of Sequestration, the Dow closed at 14,090, the highest it has closed since 2007, and only about half a percent short of the all-time record high closing. Does that mean investors think sequestration is a good thing? Or will the news hit on Monday?

I think its an indication that the 1% are pretty confident that they aren't about to lose access to their "play with it money" through the closing of tax loop holes. Unless their compny is contracting with defense they don't give a shit about spending cuts. These people all have a "boutique medicine" membership so cuts in medicaire don't register as "real" to them. They really only care about themselves.

What's the saying " I did/said nothing until they came for me...."

[Anonymous]

Anonymous wrote:
The stock market has nothing to do with the health of the country/economy. The vast majority of the trades are done by computers looking for short term gains(that can be measured in factions of second).

But when you a looking at a situation as momentous as the Sequester, and hours between the time that it became clear there would be no rescue and the close of the market, the people controlling those programs had plenty of time to intervene. However, I do nt disagree that those people might see gain for the stocks even though joblessness will increase and other aspects of the economic situation will deteriorate.

The markets had about a month and half notices the SQ. The programs are very complex, looking to make a few cents on multiple trades in a fractions of a second. It really has nothing to do with long term value of a stock or the US economy.

http://topics.nytimes.com/topics/reference/timestopics/subjects/h/high_frequency_algorithmic_trading/index.html

Over the past few years, high-speed or high-frequency trading — known as H.F.T. — was the biggest new thing to hit Wall Street trading, and in the minds of many, the most disruptive. On any given day, this lightning-quick, computer-driven form of trading accounts for half of all of the business transacted on the nation’s stock markets.

Critics say H.F.T. has contributed to the hair-raising flash crashes and computer hiccups that seem to roil the markets with alarming frequency.

H.F.T. first became a significant part of the Wall Street scene in the 1980s, when it was blamed for exacerbating the market plunges in October 1987. Since then, the computers involved have grown vastly more powerful and the algorithms that guide their trading vastly more sophisticated.

For years, H.F.T. firms have operated in the shadows, often far from Wall Street, trading stocks at warp speed and reaping billions while criticism rose that they were damaging markets and hurting ordinary investors. More recently, they have been stepping into the light to buff their image with regulators, the public and other investors.

At the same time, figures suggest that the practice may be cooling down a bit. Profits from high-speed trading in American stocks were on track to be, at most, $1.25 billion in 2012, down 35 percent from 2011 and 74 percent lower than the peak of about $4.9 billion in 2009, according to estimates from the brokerage firm Rosenblatt Securities. And the percentage of stock trades handled by firms that specialize in H.F.T. fell to about 51 percent in 2012 from 60 percent in 2009.

Drops in overall trading volume have made it harder to make profits for traders who quickly buy and sell shares offered by slower investors. In addition, traditional investors like mutual funds have adopted the high-speed industry’s automated strategies while the technological costs of shaving further milliseconds off trade times has become a bigger drain on many companies.

[Anonymous]

The reason the Dow is even close to where it was 6 years ago is money printing and artificial low rates. There is nowhere else to put money. When rates rise everything will collapse. Bonds/ stocks and the gov can't afford the interest. Money printing is here to stay until the dollar collapses.

[Anonymous]

Anonymous wrote:The reason the Dow is even close to where it was 6 years ago is money printing and artificial low rates. There is nowhere else to put money. When rates rise everything will collapse. Bonds/ stocks and the gov can't afford the interest. Money printing is here to stay until the dollar collapses.

But we can prevent that by cutting taxes on the rich, right?