manipulated by buddies of the administration. Lest you forget there are a few bigwigs from Goldman in this administration. everything is being orchestrated. This whole house of cards is a farce.
dont matter much how those numbers are interpreted by the mkt, all that matter is that they made and will make the line of every single bush speech.
Bitty, it doesn't matter if they make the Bush speeches. The equity markets key off the fixed income markets. And Bond traders are not trading off of Bush, they are trading off the yield curve. The problem is, very few people on ET understand how the market actually works. They actually believe Aunt Betsy is pushing the market higher when she buys her 15 shares of MO. Here is one way to think about the markets. It's one big arbitrage trade. Not an arb in the sense of locking in a profit between a real and synthetic instrument, but rather an arb for yield. The market is trying to capture yield. Or put another way, the market is trying to capture relative yield. There is a constant relationship between interest bearing products with less risk, and non-interest bearing products (equities) with more risk. Traders are chasing alpha. They are chasing performance. And every market in the world from the dollar, to the yen, to the sp 500, to the 30 year bond produces some return relative to it's own risk. Traders are looking for that optimal level where they get the most return for the least amount of risk. The top of the food chain is not the equity guys though, it's the fixed income guys. The fixed income guys are not trading off of Bush. These guys are pretty smart, the Bill Gross's of the world, who control hundreds of billions of dollars by himself alone. Do you realize how big the swap market is. We are talking greater then 124 trillion dollars worldwide. Do you guys realize how big that is. That's trillion! These guys are trading swaps and options on swaps in size that you cannot fathom. THIS is what is pushing the equity markets, not Bush. The problem is, I would bet a dime to a dollar that most on this thread could not even tell me what a swap is without googling it. Or even what the ISDA is. This is what is really sad about ET. They live in their own little world, perhaps trading ES futures and they are completely oblivious to the big picture. They live in their own little world of paranoia and fear. Every tick that goes against their short position, they have a Jack Kennedy conspiracy theory waiting in their back pocket. All they really need to do is actually accumulate some knowledge of how the market really works and everything will become a little bit more clear to them. Knowledge is power guys. Do you guys even know what the basis is right now on corporate to treasuries? See, that's the problem.
Mav..with posts like that do you realize you are increasing your credibility far too much...ok what do you want? Would you, OptionsCoach and RiskArb, please start posting big words in the options forum again, we (us guests) need you... ElectricSavant
Mav, You certainly know the ins and outs of how to trade the global economy, and one can learn much from your posts. On the other hand, you still haven't convinced me of how all this gets sold to mom and pop on Main St. USA. As I've stated before, I don't buy all the CT crap either. But you have to admit the average Joe ain't convinced globalization is a good thing and the politicians haven't been able to sell it on Main Street. Here's why, IMO. According to Business Week, the average CEO of a major corporation made 42 times the average hourly worker's pay in 1980. By 1990 that had almost doubled to 85 times. In 2000, the average CEO salary reached an unbelievable 531 times that of the average hourly worker. Until that gets dealt with guys like me ain't gonna' buy the "global economy is good for us" speal. Now you may argue that we have no choice but to deal with it, and to a degree I'd say you were right, in the short term. Longer term, it just won't fly.
OK, let me deal with this argument directly. I often hear this brought up and this argument is full of major flaws. The largest being that we are not making an apples to apples comparison. In our society, and most others, those who take risks, add gamma to their earning potential. In other words, their income potential is squared over time and becomes exponential. Those who don't takes risks, have a more linear income stream with a fairly flat slope. The truth of the matter is, while it often seems romantic to think of all us becoming rich and living the life of excess, most of us have no interest in taking the kinds of risks that provide that potential. The reason is it becomes somewhat of a binary bet, only without the binary outcome. To put it more succinctly, if we had the opportunity to place a bet by flipping a coin with heads being we become filthy rich and debt free or tails we go completely broke, lose every dollar to our name and incur a lifetime of debt and humiliation. And let's say the odds of getting heads is 1% and the odds of getting tails is 99%. What would you choose? LOL. Well, most normal, rational people would choose not to flip and play the game. We would continue to live out our meager existence to avoid the extreme negative outcome that is the result of taking large risks and losing. Some people however say, f*ck it, I'm going to flip. Who are these people? They are famous actors, musicians, artists, CEO's, traders, gamblers, writers, etc. People who become fabulously wealthy when they make it (we only hear from the winners). The losers disappear or become cautionary tales. We warn our children about these people and tell them to become teachers, salesmen, join a union, anything boring and simple, just so they can avoid the possibility of failure of taking risks. The bottom line is, we would all love to be Brad Pitt, Tiger Woods, Michael Jordan, Donald Trump, Steve Cohen, Sam Zell, Tom Brokaw, Edward Murrow, etc. They are the winners. The risk takers. There were millions of people who tried to be them and lost. Let's take a look at one more example, traders. Is the income distribution fair in the trading world? Not even close. In fact, it makes the CEO to worker example pale in comparison. The best traders, the Steve Cohen's and the James Simmons make nearly 800 million a year. The worse traders make nothing, in fact, worse then nothing. The worst lose money, lose everything, and go into a lifetime of debt. How many traders really make it? Maybe 5% (10% tops). definitely not fair and equitable. However, the profession is the epitome of risk taking. There is no way to even the distribution of returns to make it more fair. Doing so, would negatively impact the returns those at the top are getting for taking the risks that they do. CEO's are usually not giving their position at birth. Most of them start out at the bottom of company. Jack Welch started out in sales and engineering at GE and worked at the bottom for nearly 20 years before he actually made any kind of money. It was only after 40 years at GE do we see him as the wealthy and successful (ex-CEO) that he is today. He is one of the "winners". How many at GE tried to do that and failed? We will never know (survivorship bias). So you can't compare CEO's to common laborers because both parties are not taking the same risk. The common laborer gets a check every 2 weeks. He works 9 to 5. He has a job with minimal responsibility and virtually no risk. As long as he has a job, his dinner plate is full. The CEO does not enjoy the same safety. Every day he has to take risks, take chances. If he has one mistep and his stock drops, or his misses earnings one quarter, he could be removed. He could lose his job, re-sign in humiliation and perhaps not ever be wealthy again. Surely he will go out on his own, start his own company with whatever capital he managed to save over his life, only to get bitten by some random outcome that leads to failure and bankruptcy. Meanwhile the commoner is still making the widgets in the factory and putting food on his dinner plate. He is none the wiser. Also, let me point out that when comparing CEO salaries to that of their workers, it's not the actual salary of the CEO that is high, but rather the compensation. Most CEO's are given generous stock options and stock. If their company does well and the stock goes higher, they make billions (think MSFT). If it doesn't , in many cases they worked for free (think of the dotcoms in 2000). The only way we can make an honest comparison to labor is if we took a wage earner from Radio Shack and compared them to a wage earner at Best Buy. My guess is their mean income will be very similar (they are both not taking any risks). Now if the worker at best buy was making 300k compared to the worker at Radio Shack that is making 30k (both have the exact same job), then we would have a serious in-equality present. However that is not the case. The reality is one person is trying to be the next Michael Jordan, the others is simply selling Air Jordan sneakers at the local shoe store. The income distribution cannot share the same slope. One has much more curvature in their income slope then the other. At the end of the day, you have to make a choice. Do you want to flip the lop-sided coin (1% heads, 99% tails). Or do you want to be entertained by those that do? Most of us would choose to live vicariously through the ones that do and complain about their success afterward.
Mav incredible stuff...may I post a reply to ther snip below... It according to how many chances i get To put it more succinctly, if we had the opportunity to place a bet by flipping a coin with heads being we become filthy rich and debt free or tails we go completely broke, lose every dollar to our name and incur a lifetime of debt and humiliation. And let's say the odds of getting heads is 1% and the odds of getting tails is 99%. What would you choose? LOL. Well, most normal, rational people would choose not to flip and play the game. We would continue to live out our meager existence to avoid the extreme negative outcome that is the result of taking large risks and losing.
Mav...lives options.... when he is making love to a woman he is merely entering gamma...into the path of least resistance..of course with protection...that only arb trades can give... mav could prolly teach me options...can I bring Wifey? folks its that "plain speak" that sinks in...