Here is my theory as to why in one facet of the economy, there is very little inflation, wages.
Being human we are all greedy, nothing new, we all want as much as we can get for ourselves. Long, long, ago, the people at the top of the pyramid had it all, those at the bottom, not so much. One on one those at the bottom didn’t stand a chance against those at the top. Well, slowly the bottom started to get organized, unions. Soon the tide was lifting all ships, wage inflation.
Well, soon the unions were getting beat. So now there is no organization to try to get more for those at the bottom, it’s each man for themselves. And the man who is going to win out is the one on top, CEO’s. Now there is no tide lifting all ships, just a single ship with all the gold.
Result, no wage inflation. Nor will there ever be again in this system, because no one at the top is going to share with everyone at the bottom from the goodness of their hearts. Because greed will always be present.
I guess the adage of don’t fight the Fed doesn’t apply anymore.
Well I wonder if the market action the last week is going to scare the Fed into not lifting rates, as they have let on that they would.
Sometimes the way the market acts reminds me of a mean drunk. You always have to be very careful because you are never sure about how anything you say will be taken.
As an example look at last Thursday and Friday. On Thursday the ECB didn’t go as far as the market had hoped it would, and showed its displease that easy money wasn’t going to be as easy, and went down. Then on Friday, when uneployment data from the US all but guaranteed a rate increase, the market went up, because money wasn’t going to be as easy as before.
Splain that to me Lucy.
Today the employment report came out and it was a blockbuster. Should have been bad for the market since up to this point bad news was good for the market because the Fed would keep interest rates low.
But the market went up defying the current logic. Has the tide turned whereby now good news will be good for the market and bad news will be bad. Or have we arrived at the point where all news is good, Nirvana I think it’s called.
The only thing I can imagine right now is if logic is being defied, then a hoax is being perpetrated.
So the ECB is sounding very dovish. Unfortunately our signal is now sell until we get a pullback, so I hope it comes soon because these up days are starting to get old.
From what I’ve read one of the things that made times during the great depression bad was the currency wars. From this I don’t understand why our markets would react so positively to the ECB trying to lower the Euro. I suppose that the markets are figuring that the Fed would not even entertain the thought of raising rates and strengthening the Dollar. So then what’s so bad about a currency war? Seems to me that would ensure that rates never go up again. No one would want their currency to climb.
It seems the “interest rates will not rise” crowd has control again, any little drop is met with buying. Well it could last through the year or not. Maybe there will be another flare up in the currency war and the doller will resume it’s climb.
I feel sorry for this market, it’s so wrapped up in what the Fed is going to do it doesn’t know which way to go. If it goes up one day, the feeling is the Fed will raise rates so it goes down, but when it goes down the feeling that rates will not go up takes hold and the market rises. And over and over it goes.
These are the the type of days that tear me apart. My natural disposition is pessimistic. So when the system tells me I should be long and my gut tells me I should be short, and the market goes down, I think that I should go with the gut. But then my brain jumps in the fray and reassures me that in the long run the system will win out.