At the end of last week, two news items proved me right on the present (but long-standing, and increasing) irrationality of botht eh stock market and the commodity markets. These truly are the Stupidest People on Earth, and the same disease (momentum, computer gaming grading) affects ALL financial markets these days. In fact, it is not an overstatement to say that such disease was a major cotributing factor to the present economic "crisis". Nope. I don't care that SOME of these computer gaming traders are making money. The people at ENRON (not to mention banks and brokerage houses) made money, until the house of cards collapsed. This blog has shown you again and again that these really are the Stupidest People on Earth (Wall Street and people in financial markets).
Do you doubt this? Look at Friday's news items. Several oil demand forecasting groups, including the government, REDUCED their projection for world oil demand this year (according to my brother--he with the failed trucking company--not enough). Oil has risen 80% or more from its low. Even if you argue that it went too low, that rise is IRRATIONAL.--a "bubble".
It gets worse. CNBC put out an item, while--as usual--failing to recognize the significance of the item. Someone did a correlation between the stock market and the commodity oil market. The result was a 70% positive correlation between up moves in the stock market (Standard and Poors 500) and up moves in the price of oil (oil futures). That is beyond irrational. It is totally worthy of the Stupidest people on Earth.
Why is it irrational? I will explain it to you., as I have explained in prior entries abut the irrational rise in the price of oil (in the face of a world awash in oil). A rise in the price of oil is athe equivalent of a TAX on the economy (also true of the Democrat proposed legistaltioin to tax "dirty" fuels like coal and oil using the excuse of "global warming").
Not only is a rise in the price of oil irrational when demand is going DOWN, and supply more than plentiful, but an irrationally high oil price SHUTS DOWN THE ECONOMY--at the very least acting as a large drag on the economy. The irrational spike in the price of oil futures to $147 a barrel, after the economy was already faltering, was a factor--if hardly the main factor--in our economy going into recession. That recssion resulted in the most recent bursting of the oil price bubble, as the (coputer gaming) price of oil was cut by more than 2/3's (MORE than the stock market, housing, or the economy as a whole).
In other words, it is an absolute fact that a rising price of oil HURTS future oil demand, addds to supply, and is disastrous to the ultimate price of oil in a weak economy. This does not take brains. It is obvious to anyone with a brain. The Stupidest People on Earth have no brain. How else can you explain the sdtock market going UP in tandem with an exploding rise in the price of oil futures?
My 88 year old mother, by the way, noticed the correlation between rises in the price of oil and rises in the stock market BEFORE CNBC. She has been assrting that irrational relationship for MONTHS.
Now Rick Santelli (the only non-economic fascist I have seen on CNBC) has claimed that commodity traders are not like the socialists/economic fascists on Wall Street--that they still believe in a "free market" not dominated by government. And it is true---as far as I know--that commodity traders have not demanded govrenment hand outs/bailouts. However, these news items on Friday show that commodity traders are part of the disease--the "pandemic"--that is killing Wall Street. Indded, the disease may be even more virulent in commodity markets. Taht disease is sto treat markets as a computer gaming casino, where economic reality is irrelevant. ENRON did that in energy trading. I have not noticed that oil traders learned a single thing from ENRON, as Wall Street did not learn a single thing from the bursting of the dot.com bubble (or the stock market crash in 1987--much less the crash in 1929, as computer gaming speculation is ruinning financial markets at least as much as it did in 1929).
Q.E.D. These are the Stupidest People on Earth.