Friday, August 21, 2015

Is the stock market crashing?


In my 40-odd years of business reporting, all the 500-point daily drops in the Dow-Jones Industrial Average signaled crash. True, those were from lower levels to begin with, so that the percentage fall was bigger.

Still, 500 points is impressive.

All the more so when there appears to be no particular driver. Reports cite a slowdown -- not even a reversal -- in the growth rate in China. But we have understood -- RtO has, anyway -- for years that China's numbers were both partly imaginary and wholly based on an unstable economic organization.

If the market is supposed to be this magic place where all information is subsumed, masticated, digested and processed, way is the market reacting to China's well-known difficulties only now?

Curious. Maybe market theory is radically incorrect at a fundametal level. RtO has always said so.

Or maybe it's just that historically bull markets seldom run longer than 6 years.  But that doesn't make market theory look good, either.

If you listen to Republicans, the key ingredient in business is not investment, competence or innovation but something called "business confidence." So what changed between last Friday and this Friday to dampen business confidence?

Answers must refer to changes in objective conditions. Everything else is hand-waving.

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