Live by the stock market, die by the stock market

During all the fiascos that have been happening one after the other during the Donald Trump presidency, there was one thing that he could boast about and that was the stock market. During his first year of office, it rose by a whopping 25%, greatly pleasing the wealthy class that are the ones who have most of their assets in the stock market. Ordinary people with retirement plans also have a stake in the stock market because those funds are invested in it but I suspect that most are like me and have little idea of what is happening because we do not actively buy and sell stocks ourselves.

So purely on the basis of the market rise Trump could claim that the economy was booming and that people were better off even if wages were largely stagnant. The massive tax cut for the wealthy that he and the Republican party engineered that siphoned even more wealth to the oligarchy sustained for him the illusion that things were going swimmingly, since he and his friends were doing well.

But now even that is coming crashing down. I do not understand the stock market and what makes it go up and down but for whatever reason, the last three months have been terrible for it, with prices tumbling around 20%, the steepest losses occurring in the last month. The market figures now are not much higher than when Trump took office. As a result, Trump is lashing out trying to avoid blame for the situation, seeking scapegoats to blame the losses and he seems to have decided that the villain is the Federal Reserve and its chair Jerome Powell because they have raised interest rates. He says that he has a much better understanding of how the economy works than Powell and reportedly has sought to fire him. The possibility of that move, coupled with the government shutdown and the trade wars and general instability, are being blamed for the recent losses.

Oddly enough, the treasury secretary Steve Mnuchin, in an apparent attempt to calm the markets before they opened this morning, may have scored an own goal, by tweeting reassurances that the liquidity situation of the banks was strong, which was not one of the things that people had been worried about. As Jared Bernstein, who was economic adviser to former US Vice-President Joe Biden, said, “It’s like sending out a message saying our space shields can intercept incoming asteroids. Uh, I didn’t know there were any coming our way.” Other economists like Paul Krugman have blasted the sheer ineptness of Mnuchin’s actions, even calling him an ‘idiot’ and that “We should take seriously the possibility that we’re looking at an economic team as clueless as their boss.” Despite Mnuchin’s attempt at reassuring the markets, it dropped sharply today, even during a shortened session.

Trump had reportedly been planning to spend 16 days over the Christmas and New Year period at his resort in Florida, but even he, insensitive and oblivious as he is of others, must have realized that pictures of him golfing while the government is shut down would look bad. So he has decided to stay in Washington. But that has not prevented him from self-pitying whining about it, tweeting ” I am all alone (poor me) in the White House.” You can expect a steady stream of tweets from him over the next week, during the commercial breaks in the TV shows he seems to watch obsessively when he is not playing golf.


  1. says

    In ancient Rome someone would have sent a praetorian to strangle him and put us all out of his misery.

    I was kind of planning to retire this year but my smallish fortune just turned into about half of itself. It would be a pleasure to thank Trump personally for his tremendous skills as an utter fuck up. I’m happy I am still doing well, compared to most of my fellow Americans; they ought to be building guillotines and tumbrils right about now. It’s amazing that he’s complaining about how lonely he is in the White House when he just cut off the paychecks for federal employees, “ho, ho, ho!”

  2. says

    I do not understand the stock market and what makes it go up and down

    In its most basic form, it is gambling that the market will go up or down, and the market price of stocks is tied to people’s willingness to believe they will go up -- because if they believe they will go down, they will unload the stocks for whatever they can get for them. Long-term the stock market is a proxy for the financial sector’s belief that the economy will do well in the long term.

    So when Mnuchin says “hey! The good news is there’s no general collapse or run on the banks!” it’s like telling someone “the good news is there is no grizzly bear right behind you about to eat your head” -- you’ll probably think “it’s oddly specific he said grizzly bear,” as you prepare to run in panic.

    As an imperial power with the greatest concentration of wealth in history, the US economy is as close to a sure bet as you can get, for maybe the next 100 years until global warming wipes humanity out. So the market ought to stay high. But people’s confidence in the US economy is being governed by a malicious ignoramus who has shitbagged every business he’s ever run -- the trade war just put the brakes on US economy growth for a couple years and the tax cut was like giving a zombie a great big shot of meth and missing the vein. People are understandably thinking “maybe I should get my money out…” which means they’re starting to sell shares, which drives the price down (supply/demand = value)

    It’s even more pernicious because those who got out early are now sitting on cash that they can use to buy up real estate when people can’t make their mortgages. Someone always comes out very rich when there’s a disaster for everyone else.

  3. polishsalami says

    We are entering the most dangerous phase of the Trump presidency. I think he will consider starting a war with Iran, if he thinks it will save him from Mueller; and his friends’ money disappearing on the stock market will only hasten his decision.

  4. Jazzlet says

    I wish I thought that Trump starting a war was a ridiculous idea, sadly I don’t, though it might still be North Korea rather than Iran. Trump does have a pattern of turning on his buddies if they don’t toe the line. Mostly I try to aoid thinking about that possibility, there is nothing I can do to stop it, and nothing I can do to prepare for it so what’s the point in worrying?

  5. Mano Singham says

    Marcus @#3,

    I understand in broad general terms what you say, that if people think the market will go up, they will by and that sends prices up, and vice versa. What I don’t understand is what makes large numbers of people decide that it will go up or down. Is there any objective basis for it? There are these so-called leading indicators of the economy that predict how the economy will do but many times the gyrations seem to have little correlation with them. The explanations given for the rise and fallof the market seem to be created after the fact, just-so stories made up to give the impression of rationality.

  6. says

    Different people use different indicators to decide if they think it will go up or down. For example, Warren Buffet and Peter Lynch use what is called “value investing” -- they look at the profit margins and opportunity of a business and study the competitive landscape and they buy in or not. A value investor tends to be long-term (imagine if you had bought Apple on the IPO -- you’d be so far into the money that this little hiccup would barely scratch your profits). Then there are “quants” -- number driven programmed traders who look at short-term indicators and try to grab a few percentage points as they bounce into or out of a stock. Sometimes they are also known as “penny traders” -- because if you can make a few pennies on a big number of shares you’re making big money pretty fast. The quants look at stuff like moving averages and when a company’s profits/earnings ratios cross certain lines, etc. It’s all sciency but basically it’s gambling.

    “How do you know what horse to bet on in a horse race?” Is a related question. At the bottom of it all, it’s always guesswork.

    So, the specific problem: there are some quants that are pretty sure certain stocks will go up if the federal reserve tightens credit. So if it looks like that is happening, they jump in those and sell out of others. For example tech stocks generally track infrastructure investment in companies which generally tracks the availability of cheap capital loans. When the fed tightens the money supply, tech stocks get slaughtered because investors sell out of them expecting them to go down. Which makes them go down even harder.

    A lot of this trading stuff has a time criticality element, as well as an information criticality. The person who can move their shares faster and sees a few seconds into the future always does better than the other guy. The people who built and run this system have arranged it so that they have time and knowledge advantages -- so the house almost always does better than the punters. As long as the punters are doing OK they don’t care that the game is rigged. And so it goes.

    So what Mnuchin did was like telling everyone “good news you don’t have cancer!” And everyone thought they were signaling “actually you kinda have a little spot in your lung” and they jumped and dumped out of the market.

    One more important point: when you jump out of the market, you’re basically cashing out and the market can drop through the floor and… you don’t care! You have cash! Now you can buy real estate! So jumping out of a market fixes your profits or freezes your losses. That’s a good thing, for most investors, which is why they do it. Imagine if you got the jitters about them market and sold your Apple stock. Now you are sitting on millions of $ in cash. If the market goes back up you’ll have to pay a bit more if you buy back into Apple again but you might just buy another yacht (bad investment they don’t hold their value or appreciate) or a house in Hollywood (good investment as long as it doesn’t burn) so these slides become a chance for rich people to re-balance their investments. That has the effect of making the water choppier for everyone else but fuck them I got mine.

  7. Mano Singham says


    Yes there is a market but since the commodity in question is so plentiful and new ones continually arriving, the prices are always low.

Leave a Reply

Your email address will not be published. Required fields are marked *