As I write, the market does not seem worried about tomorrow’s pending ruling from Germany’s Constitutional Court. It is trading in the green today. Could it be that the high hopes for QE3 (think the Fed tomorrow) trump the ruling?
Switching gears, my recent commentary and responses to recent questions about my regard for fact in understanding the market have generated an interesting commentary in the guise of a question. Thus, my response to the reader will be to comment and then to answer the question.
How is it what one can say they are trading the “truth” … when all that is happening is market manipulation … that one currency is used to prop up the other … the can is being kicked down the road … and you are just a follower … following the so called rest of the herd that lives in an illusion? This is not fact.
It is true that market manipulation happens, but it is not true that the whole of the market is manipulated all the time, at least as far as I can tell. I base this conclusion on my years of watching the market react to a variety of different stimuli. Much more often than not, the market reacts to the news or data of the day, which suggests to me the market is reactionary. Of course, this does raise the possibility that the news or data is designed to manipulate the market. To a degree, yes, but not on a grand scale. Rather, grand scale manipulation is outright and obvious. Witness the Federal Reserve. This agent has a massive influence on the market and it uses that influence. Witness the manipulation of the US dollar and interest rates, for example. As well, witness its quantitative easing program. These are huge market manipulations. These actions are not nefarious, but they are market manipulation.
As to one currency propping up the other … I suspect such global coordination is not in play. Witness the argument between China and the US about the Yuan. As well, note how every country that can manipulates its currency to gain competitive advantage. In this, there is clearly not one currency propping up the other.
It is true that “kicking the can down the road” has been the “resolution of choice” for both Europe and the US, but I see those days ending relatively soon. The reality is that neither Europe nor the US can afford any more dallying on the road to fiscal and monetary solvency. The issue no longer is when; it is how. Will Europe continue severe austerity to fix its fiscal issues or will it combine some stimulus with the budget cuts to help end the overall recession? The US has the same choice. Therefore, the question becomes: will both economies go bust or will they do a gradual debt reduction to allow for economic growth, thus raising more revenue to pay down the debt. To a degree, this is more kicking the can down the road, but the latter route is playing the game with a strategy, not just willy-nilly kicking. This choice is factual.
As to me, or all of us for that matter, being followers following “the rest of the herd that lives in an illusion,” I reject this notion, again, to a degree. Yes, in many ways we all move in a direction because the mass of us is moving in that direction, but at the same time, within that massive movement, each of us has the power to choose, especially as it relates to making trading or investment choices.
You see, I get this, all of this, so to me it is not about trading the “truth;” it is about trading the market, and the market is what it is, and it is not one big worm on a hook, as the reader implies. This understanding takes me back to being a realist, not one who succumbs to doom and gloom, or one who “lives in an illusion.” I trade on reality, not the hype the breathless media feed us, and that has paid off well in the last three years.
The type of fear the reader conveys suggests he should not play the market at all. In fact, he and those who think this way, should break through the noise and find some reality, or, at a minimum, seek out some facts.
Trade in the day; Invest in your life …
