Why did the DOW gain 889 points today?
 

Getting ahead of the anticipated rate cut among other things.

I think right now we are seeing a lot of gambling (both low and high).

JM

faith

People invested in the stock market. http://www.discussworldissues.com/fo...milies/nod.gif

Originally posted by KrazyHorse
Why did the rate cut become suddenly more likely today? It probably didn't. But that doesn't matter. What matters is how the market perceives the chances...

http://biz.yahoo.com/ap/081028/fed_interest_rates.html
Fed Chairman Ben Bernanke and his colleagues opened a two-day meeting Tuesday afternoon -- their last before the November elections -- to make a fresh assessment of economic and financial conditions and decide their next move on rates. Their decision -- widely expected to be a rate reduction -- the second in two weeks -- will be announced Wednesday.

Betting on a hefty rate cut, Wall Street staged an energetic rally. The Dow Jones industrials zoomed 889.35 points, its second-largest point gain ever.

Originally posted by Vesayen
I do not trust financial reporters in the media, nor do I trust the economists that they interview. Not that I think there is any grand conspiracy(there is not), simply that the economy is complex and most of the so called "experts" are wrong so often that I believe that they vastly inflate their expertise. http://www.discussworldissues.com/im...ons/icon14.gif

I don't see why liquidity is a problem here. Lower interest rates aren't going to solve the problem.

The market will just give this all back in another week or so.

Asian markets rallied yesterday, the DOW followed suite.

It won't last.

Originally posted by Theben
Asian markets rallied yesterday, the DOW followed suite. North American markets followed Asian markets after remaining flat until 2pm ET? Why?

Originally posted by KrazyHorse
My point is that you shouldn't say things like "Getting ahead of the anticipated rate cut among other things. ". It's was a technically correct statement. /shrug

It's a meaningless statement. Then you're getting your panties in a bunch about nothing. Good work http://www.discussworldissues.com/fo...lies/smile.gif

It is the type of statement which contributes to the impression that there is real reasoning behind day-to-day movements of markets. Wait, you just said it was meaningless. How could it convey the meaning you are ascribing to it if it contains no meaning?

There are plenty of real reasons for day-to-day movements in the markets. Countless ones really, each individual investor has their own reasons for their actions, which is part of why predicting them in aggregate is so difficult (at least short term).

But as you admit in the next sentence, sometimes specific factors stand out enough that you can identify them.

Sometimes there is a discernible reason behind movements. Most times there is not. Today is one of those days where a specific factor on upward pressure on prices did stand out. (I would say more from the short covering side than people going long...) I'm sure there were plenty of other reasons too, but the talk about rate cuts clearly were a factor today.

Originally posted by Kidicious


People bought stocks. There. We don't need markets. http://www.discussworldissues.com/fo...s/rolleyes.gif

Originally posted by Vesayen
Today, the DOW gained 889 points.

...

So, any theories on why the DOW made huge gains today? For the exact same reason that dead cats bounce when thrown from great heights.

If they cut the rate to .5, that only reinforces my belief in deflation.

Originally posted by KrazyHorse


http://www.discussworldissues.com/im...ons/icon14.gif Please don't give that man a thumbs up, unless it's up some orifice and he's not liking it.

He's absurdly paranoid, even if he is right occasionally, so it must not be encouraged.

Originally posted by KrazyHorse
What belief? (Just a question) To clarify, I believe that there will be deflation.

Originally posted by KrazyHorse
I think there is a significant probability of deflation too.

This would be a function of the money supply shrinking as credit (and thus the money multiplier) reduces due to excess risk aversion.

In this case, dropping the fed funds rate will have the same effect as pushing on a rope. Right, and without analysing the data, seeing the fed make a drastic cut like they are expected to makes me think that they also believe in a high probability of deflation.

Originally posted by KrazyHorse
The really interesting story today was Volvo. That's where a specific mechanism was active in moving prices, which for a time made Volvo the largest company in the world. You mean Volkswagen. Indeed, that was an interesting and funny story that could, in part, move markets.

But the story of bigger magnitude that I have been focusing on is the unwinding of the Yen-Dollar and Yen-Euro carry trade. Yesterday, the Dollar increased 7% versus the Yen. The Euro increased 10% versus the Yen -- truly enormous moves. There was a rumor that the Japanese central bank would lower Japanese interest rates and/or start paying interest on reserves to Japanese banks.

Both of these stories are related to investors getting squeezed out of their investments. In the case of VW, it was hedge funds getting caught in a short squeeze. In the case of the carry trade, it may have been relief after positions were successfully unwound.

It was fun to watch. Never seen anything quite like it.

I wonder how much Porsche will be able to pocket because of this, and who is left holding the bag.

probably manipulation.

Top % gains of the dow:
03/15/1933 62.10 8.26 15.34
10/06/1931 99.34 12.86 14.87
10/30/1929 258.47 28.40 12.34
10/28/2008 9065.12 889.35 11.88
09/21/1932 75.16 7.57 11.36
10/13/2008 9387.61 936.42 11.08
10/21/1987 2027.85 186.84 10.15
08/03/1932 58.22 5.06 9.52
02/11/1932 78.60 6.80 9.47
11/14/1929 217.28 18.59 9.36

Originally posted by The Mad Monk
Krazy, did you change professions, or did you just decide to take up something even more convoluted than physics for a hobby? http://www.discussworldissues.com/fo...lies/smile.gif Quant finance = backup plan. Or at least it was until all the IBs went out of business. Though it looks like most of the hedge funds are running strong.