Friday, June 4, 2010

Markets in turmoil

June 4 (Bloomberg) -- Stocks plunged, sending benchmark U.S. indexes to four-month lows, commodities slid and Treasuries rallied as lower-than-forecast American job growth and a widening government debt crisis fueled concern the global economic recovery will slow. Hungary’s currency, equities and bonds plummeted.
The Standard & Poor’s 500 Index tumbled 3.4 percent to 1,064.88 at 4 p.m. in New York, with only three stocks in the gauge rising. The Dow Jones Industrial Average sank below 10,000 and both measures closed at the lowest levels since Feb. 8. Oil fell 4.2 percent to $71.51 a barrel, while tin sank 9.5 percent to lead declines in metals. Ten-year Treasury yields decreased 17 basis points to 3.2 percent. The euro slid below $1.20 for the first time since March 2006 and the yen climbed against all 16 major counterparts. The forint tumbled to an almost 15-month low against the dollar on concern Hungary may default. --
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Comment: All social phenomena are human phenomena. The stock market is a social phenomena and thus it is a human phenomena. The stock markets can't be more rational than its players. When the players go bezerk, it shows up in the markets. Global markets have become a game of fools. Over the past decades the intellectual capacity of the majority of the market operators has dropped dramatically. And worst of all, it won't bet better. As much as it is impossible to be honest in an unhonest monetary system, it is likewise impossible to stay rational in an irrational market. In the past, it was mainly politics that has been most attractive to fools and crooks, now there are so many fools and crooks around that politics is too small to host them. Thus financial markets markets have become the first refuge of the oversupply of fools and crooks. Financial markets are not different from politics and an universal Gresham's law applies as well that the good gets crowded-out by the bad. When we talk of financial markets one should note, however, that this includes banking, and in banking, definetely, fools and crooks outnumber financial market operators by a wide margin.

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