The sharemarket moved because…

Written By: - Date published: 10:07 am, November 23rd, 2016 - 17 comments
Categories: business, capitalism, economy, Economy, journalism, making shit up - Tags:

This is just something that gets my goat, and there was a particularly egregious example on the RNZ Business News this morning.

Apparently Wall St was going ‘gangbusters’, and the reason they came up with for that was ‘Wall St’ liking Donald Trump’s policies (lowering tax and building infrastructure apparently).  Not long ago Wall St was collapsing because of the fear of Donald Trump.  As far as specific policies, he’s not got many (having taken multiple sides to most issues during his campaign), except announcing yesterday that he’d kill the TPP by executive order on day 1 of being in office.

That’s the TPP that favours those biggest Wall St companies in the Dow Jones over all other people, and its cancelling is an unequivocal ‘bad’ to them (maybe not to the rest of us…).

The desperation to find meaning in the sharemarket is ridiculous.  It’s like reading tea leaves, or deciding the weather is warmer today because the gods like The Donald.

The reason the Dow Jones went up is because investors felt that the short to medium-term prospects of the individual companies listed in the index were better value than they were priced.  It goes down when they don’t think those prospects are as good.

This doesn’t actually tell us much about the world of politics or economics.

Since Brexit the FTSE100 – after an initial plummet of fear – has climbed a lot.  This isn’t a measure of the UK economy though, most of the top companies that make up the index have most of their business offshore (safe from Brexit), and with the British pound plummeting they are worth more (devalued) pounds.  As to the UK economy?  We’re none-the-wiser.  The Guardian has better measures: Jobless at 11 year low, business and retail activity up all look positive; wage growth stalled and trade gap widening look more worrying – these are useful statistics, rather than looking for data in the randomness of day-to-day rises and falls.

I’m really not sure why they read out all the individual company share-prices on the radio; they are of interest to basically nobody.  For those few with the money to invest in individual companies (spread risk!), they will have far better information on specialist websites.  For the rest of us – if Sky City is at $4.40 or $4.43, what does it matter to us?  Even less so foreign stocks.

Crashes and long-term trends may have some use, but a more useful business report would be looking at how NZ business as a whole could improve, learn lessons; or actually looking at how workers are getting on, not just bosses…

(and don’t get me on to getting bank economists to be independent commentators on the housing market…)

17 comments on “The sharemarket moved because…”

  1. Market traders are like reef fish, yet media love to paint them as bold individuals being well-rewarded for their exemplary service.

  2. Cinny 2

    Government should use Kiwibank for all of it’s transactions. That is all.

  3. Nic the NZer 3

    “This isn’t a measure of the UK economy though, most of the top companies that make up the index have most of their business offshore (safe from Brexit), and with the British pound plummeting they are worth more (devalued) pounds.”

    Even for on-shore operations its unlikely to say much about the underlying economy because its about what investors think now about the price relative to what they thought previously about the price. If the news was anticipated by the market its already priced in. More the change tells you relative to what was anticipated there was a surprise. But in this sence the no change baseline is hardly neutral or explanatory to begin with.

    Nice discussion Ben.

  4. Sharemarket “news” is just another example of capitalist propaganda that we are immersed in. Perhaps it is a comforting illusion for the masses that the Masters of the Universe hava everything under control

    • aerobubble 4.1

      Really? We live in a community, however its structured, capitalism or not. Any large community needs to transfer relevent info around so reasonable decisions can be made, info is therefore valued. As we have found recently there’s been a structural breadown in information, everythin from newspaper forgetting that their archives were a means for their reders to value long term commitment to those papers. i.e wander into the library to find out past history. To, Trumps victory which arguably is the trifecta, lower wages from employees who have lower living costs in the third world coupled with technological automation, and information overload, inconsistency and basic untruth. Capitalism, propaganda, these aren’t the problem. Its leadership, new ways of getting better decisions made on both individual and collective levels. The dark thirty years of lies and distortion have screwed the capitalists in an orgy of cannialisist practices. Welcome to the zombie fiscal Apocalypse, Thatcher zombie zero. The question is is Trump a pawn for a greater churn of the same old classcal neo-liberalism, or a new networked interconnected. i.e will he break the right things or just reinforce the wrong.

      • ropata 4.1.1

        Yes we do live in a community, the rest of your rant is irrelevant. So why do media outlets waste valuable air time on sharemarket news of interest only to the 1% ?

        (The answer is: they are advertising the NZX because our local banksters need more suckers to rip off)

        • aerobubble

          Technology means the old gatekeepers are obsolete, unable to provide the information we need in a timely fashion as they still live in the 70s mindset that hangs onto the false belief they can control the narrative. Yet instead of releasing the controls on information, proecting privacy rights, they are doing the reverse, getting better at distraction and construction of false ne while even more controls of us all via privacy invasion gather more signals of which buttons they need to press. Tune out, turn off, and just ss you moved from tv news to facebook, move on to better mediators.

  5. wellfedweta 5

    It’s pretty hard for Wall Street to ‘like’ policies when it doesn’t even know what they are. It is by no means certain that Trump will follow through on his pre-election rhetoric, which is why some of the pro and anti-Trump commentary is stupidly premature.

  6. esoteric pineapples 6

    My 93 year old father listens to the share prices on the radio and television but I think it is more an existential reaffirmation of the experience of life, as death looms nearer and nearer, than a desperate need to know how much his shares have gone up or down. It’s his connection with the world, just like I connect by reading stories on the Internet.

  7. Mrs Brillo 7

    Existentialism is as good a reason as any for share market monitoring.

    The whole thing is a fantasy held up by the Tinkerbell principle – if people stop believing in it, it will die.

    I’ve never stopped believing in fairies, so I hold shares when it suits me.

  8. Ian 8

    You and everybody else has a choice on investing in the sharemarket. Looks a very free market to me. Who cares if it doesn’t spin your wheels. You pay your money and YOU take the risk. Obviously trump is spinning lots of wheels.

  9. Thing about markets and their reaction to Brexit and Trump is simply that positions were taken each time in advance of the vote which reflected common expectation (Remain will win, Clinton will win). When the vote confounded those expectation, there was as usual a panic by those who took the wrong position. Pounds and Pesos were dumped by people who bet on a rise, for instance.

    One thing for certain – most of these guys would make crap generals in a war.

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