Stock Market Swings

Ever wonder why stock market indexes swing high and low so much these days? Ever think who’s behind market fluctuations? You say the stock market is a free, open market, right? Would it surprise you to learn otherwise?

No. I suppose you wouldn’t. Not in this day and age.

There is another side to this story. And it is in full view for you to see and read. The facts:

1. Bloggers tout dangers of current stock values; they warn you to be ready for the next huge drop in values
2. Respected journalists with highly respectable publications tout the same thing as the bloggers; Wall Street Journal reports are an example; same for The Street
3. Jim Cramer of CNBC releases stories with alluring, hot titles niggling the reader about the next big drop in a big name stock; or he ponders when the next drop in the Dow will happen
4. Politicians jealous of others and their association with the successful rebound of the stock market averages attempt to sully the credit for strong markets
5. Politicians predict dire results if polls for competitors show possibility for their winning office
6. Playing public relations games with which way the Federal Reserve Board will go in setting interest rates for the open market
7. Gaming interest rate swings: why they should go up; or why they should go down; or what awful things will happen if the rates swing one way or another
8. Touting real estate sales as an indicator of good things; then touting that real estate pricing is going too fast up or down, or sideways…
9. Over emphasizing short term changes in important financial data: job growth; inflation; deflation; commodity price gains (or drops); weather patterns affecting agricultural output; and any of 1000 bits of data, none of which actually portends anything in small bits over short time periods
10. Over emphasizing the ‘small picture’ when the ‘big picture’ should always be the one in focus (i.e. making something out of nothing!) 

Well, I’m sure there are other stories and sides of stories that can be misused in propagandizing economic data for personal gain. It happens all the time. In all the financial news channels. Worried faces on CNBC newscasts, panel discussion shows over the weekend, and so many other venues. You know what I’m talking about. You see it all the time, too. Don’t you?!

If all of this hype is effective in pushing people into making financial decisions, then the hype has an effect. Those effects are not based on reality so they have an ill effect on market valuations. You know what they say about a million butterflies flapping their wings in Japan, right? They say that activity moves enough air to alter wind currents that will eventually affect jet stream pathways and alter rainfall patterns in Seattle! As if Seattle rain patterns need any altering whatsoever! Jeesh!

The very first thing each of us has to understand is this: Economics is a social science, not an empirical science. The latter acts and reacts in exacting manners that are traceable for cause, effect and results. The tracking will show immutable causes, effects and results. Every time they are tracked you will see the pathways in replicable forms.

Not so in social sciences. This genus of science is based solely on the actions of human beings, their physical needs, their social needs, their psychological needs, and also of all of their erroneous thinking. Studying a social science is exciting! For the simple reason that it is unpredictable 100% of the time. You can make lucky guesses but you will never be 100% of any result by prediction.

Social versus empirical science. Math is empirical. Physics and chemistry are empirical. Astronomy, too. Social sciences include history, economics, psychology, political science, advertising and marketing, etc. The list of modern day subject matter that is social science based is nearly endless. Empirical sciences are contained by a short list.

So, stock markets go up and down due to social influences. The ups and downs can be tracked and measured. That part is empirical. But the cause is not empirical. The whip of an idea causes the value of something to go up or down. Try predicting what the idea is or its effect on pricing and value on anything. You cannot do it.

Neither can writers about the economy. They can attempt to explain what’s going on, but they cannot know the why. If they cannot know that, they cannot know who or what is to blame or cause of the negative happening. Any such prose is 100% suspect.

So, read what the markets did for the day. Utter a groan or an aha! as you will. But please, do not pretend to know why.

Else the cause – effect – result – will be out of my hands!

August 25, 2015