Tag Archives: Economy of the United States

Global Markets Mental Health Test

After Friday’s mega jump in the US stock market, the expression “irrational exuberance” just doesn’t cut it anymore. Even if last week’s unemployment number should be an indicator of recovery for the US economy – which is doubtful – it is not a valid argument for sending the Nasdaq index to a 11 year high. This behavior has more in common with bipolar disorders than anything else. Europe‘s regulators now want to stress test the stock markets and the electronic trading platforms in the same way they’ve (relatively) successfully stress tested European banks in the past. Well, let me remind you that stress,  in general terms, is regarded only as a symptom of something else.

“Here it is; the first ever Global Markets Mental Health Test!”

econoTwist’s

But let me point out that there are per definition two kinds of stress – the biological kind and the mechanical kind. I’m not 100% sure, but I think the famous bank stress tests is of the mechanical type. So it may be quite possible that the authorities are missing vital facts about the stressed-out banks by disregarding the human factor. 

As reported by Tim Cave from Financial News.Com, a number of industry practitioners have called on European regulators to force exchanges and alternative trading platforms to adopt stress-tests, in a bid to improve their resilience to large-scale shocks, volatility and the rise of high-frequency trading.

While the concept of stress tests has become common in the banking sector after the financial crisis, and measures are also being implemented to simulate the resilience of clearing houses in times of stress, no similar measures have been suggested for trading venues.

Speaking at a high-frequency trading conference in Paris yesterday, Carlo Comporti, a director at regulatory consultancy Promontory Financial Group and former acting secretary-general of the European Securities and Markets Authority, said that needed to change, fiercefinance.com reports.

Bipolar Markets

However, both mechanical and biological stress have one thing in common; its a symptom that something isn’t right.

The actual problem is usually far more difficult to identify.

But with the recent market volatility in mind – here’s the clinical cognitive symptoms of stress:

  • Memory problems
  • Inability to concentrate
  • Poor judgment
  • Pessimistic approach or thoughts
  • Anxious or racing thoughts
  • Constant worrying

To me, that pretty much sums up the market sentiment at the moment.

And the similarities between biological and mechanical stress are fascinating.

“Biology primarily attempts to explain major concepts of stress in a stimulus-response manner, much like a how a psychobiological sensory system operates.”

(Source: Wikipedia)

A Market Mental Health Test

It’s also common knowledge that stress can be a symptom of a mental disease or disorder, as well as long-term stress is known to cause mental problems.

However,  to my knowledge there has never been a mental health test for the financial markets (and I’m not sure if there ever will be).

So, I have put together some free online tools that might be helpful in determine what kind of stress the stock market (and the banks) is struggling with, and give us a clue to what is the real and underlying problems.

 Here it is; the first ever Global Markets Mental Health Test!

TEST 1

Do you have a mental disorder?

(Take the test)

TEST 2

Which mental disorder do you have?

(Take the test)

TEST 9

Are you schizophrenic?

(Take the test)

TEST 4

Do you have a borderline personality?

(Take the test)

TEST 5

How depressed are you?

(Take the test)

TEST 6

How manic are you?

(Take the test)

TEST 7

How well do you manage your anger?

(Take the test)

TEST 8

Do you have a alcohol or drug problem?

(Take the test)

TEST 9

Are you addicted to cybersex?

(Take the test)

TEST 10

Are you a workaholic?

(Take the test)

TEST 11

Do you have  obsessive-compulsive disorder?

(Take the test)

TEST 12

Are you a retard?

(Take the test)

Please take the time to answer the poll:

Those of you with muliple personality, please fill in this one, too:

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Filed under International Econnomic Politics, National Economic Politics, Philosophy

Niall Ferguson: US Economy Is Leaking

Top analyst Niall Ferguson makes a powerful attack on the extreme Keynesian economic policy that’s ruling the world at the moment, and explains why quantitative easing doesn’t work.

“Remember what Keynes wrote in the 1930s about stimulus and the way in which government could get an economic going again really applied to a post-globalization world in which trade and capital flows had largely broken down, and most economies were quite isolated units. That’s something that Keynes made clear in the German edition of the General Theory when he said the theory applies better in a closed totalitarian economy.”

Niall Ferguson


“Globalization has not broken down. In fact the US economy is more open than it has ever been. That means that stimulus, both monetary and fiscal if very prone to what is called leakage. We’ve had an enormous of stimulus in the US, it’s the biggest fiscal stimulus in the world, and huge unprecedented monetary stimulus. What’s been stimulated? Not jobs in Michigan. What’s been stimulated has been commodity markets and emerging markets. Because the liquidity just leaks out, and that’s why another round of stimulus would not stimulate in the promised way. It would stimulate the wrong things. And those things, commodity markets and emerging markets, are already overstimulated to the point of being nearly bubbles.”


 

 

 

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Filed under International Econnomic Politics, National Economic Politics, Philosophy, Uncategorized

El-Erian: Economy Losing Momentum For Recovery

High unemployment and sluggish growth is causing the US economy to lose any momentum it had in terms of a recovery, Pimco‘s Mohamed El-Erian told CNBC on Thursday. El-Erian also pointed to Friday’s upcoming GDP numbers which he says will point to the negative trend.

“We are going to get confirmation with revised GDP numbers that are down and for the last quarter and downward revision for the third and fourth quarter.”

Mohamed El-Erian


“Today’s jobless claims numbers are better than last week’s. But it’s not a good overall. What this tells us is that the employment picture is difficult in creating and holding jobs. And the bigger picture is that the economy is losing momentum when it comes to growth.” Mohamed El-Erian, CEO of the world’s largest bond fund, says.

El-Erian also points to Friday’s upcoming GDP numbers which he says will point to the negative trend.

“We are going to get confirmation with revised GDP numbers that are down and for the last quarter and downward revision for the third and fourth quarter,” El-Erian says.

“This will also show slow growth.”

Negative Economic Trends

El-Erian goes on saying that the negative economic trends are forcing a new way to think about what makes up a recovery.

“If you think in traditional terms, then there will be a back and forth” (on economic numbers), he says.

“But if you think in terms of an economy that has to have escape velocity, so you have to achieve a critical mass in terms of growth and employment creation, the numbers are going to tell us that we are in this new normal of muted growth and high unemployment and we’re going to have to navigate through it.”

As for the bond market and a possible “bond bubble”, El-Erian saya that the rush into buying bonds is due to the fact that many investors are underexposed in the fixed income market– and that people are more risk adversed.

“If you look at what the (bond) market is telling you, it’s saying that the outlook is for low growth and disinflation. “The bond market may be cheap in terms of a slow recovery scenario, “ the Pimco-boss adds:

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Deflation Risk; 25% or higher

El-Erian also agreed with Nouriel Roubini of Roubini Global Economics who told CNBC on Thursday, that the US economy has a high risk of going in to a double dip.

“I think Nouriel is correct when he says the ‘US has no spare tire’ to fix the economy if something happens,” El-Erian says.

“I put the risk of deflation at 25 percent and the latest figures show it may be even higher.”

And in regard to policies of the Federal Reserve, whose members are meeting for their annual symposium on Jackson Hole, Wyoming, El-Erian says that he’d like to hear them talk about the so-called liquidity trap, or the idea of using monetary policy to get companies and banks to take more risks with their money when they don’t want to.

“I’d like to know if they (the FED) have any idea of how close we are to a liquidity trap. I think we are close to one, and if so, we would have to look beyond the Fed to help move the economy. They (the FED) won’t be to force people to use their money and we’ll have to look elsewhere to solve our problems.”

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Filed under International Econnomic Politics, National Economic Politics