Wall Street

Rich -> Richer
Poor -> Poorer

Charlie Sheen's riveting performance?

All the independent contracting work to construct the Death Star has boosted the economy. Obviously it will collapse since it only takes a single ship to blow it up.

We do?

Can't you hear the thundering hooves of the four horsemen Frank?

The birdsong's drowning it out.

Impending doom aside, Darth is noticing one of the untold truths about the invisible hand. Invisible Hand Theory assumes that all participants have perfect information, which is not the case. Many investors don't pay particularly close attention to market fundamentals, or they allow themselves to be convinced that long-held ideas of how economics work don't apply to whichever bubble they happen to be involved in.

Personally, I think the economy is weaker than it appears to be. The US trade and budget deficits cannot go on forever and, when we finally cut up our collective MasterCards, the whole world will take the hit in reduced consumerism. Further, it's unrealistic to believe that the US economy will continue to grow at the rate it has post-WWII. Not only are we no longer the only industrial nation still standing, but we aren't graduating enough engineers and scientists, and we aren't letting enough emigrate to the US, to maintain the edge in global R&D. Internationally, the Chinese market is a bubble waiting to burst, and that could lead to a global decline in equities.

Then again, I could be wrong. We could figure out the next internet, the innovation that fuels 15 years of growth. Boeing is kicking Airbus's ass all over the world. Microsoft has gone planetary. US business models proliferate, which means we get to define the playing field.

But I don't think I am, so I'm betting on, at best, mild growth on Wall Street and a weak dollar. I'm heavily invested in stable, profitable nations like Belgium, Austria, Brazil, and Australia; and I have lesser investments in India and some stable Chinese companies. While I maintain a significant stake in the US equities and REIT markets, I back that with national and international bonds so I can ride the troughs.

The short version is this: the market is not an invisible hand. It's a crazy cat lady who wobbles her way in generally the right direction. If you have the time to do your homework, play the wobbles. If you don't, stay broadly diversified, take advantage of the 401(k) and IRA moneysavers that are on the table, and don't stop saving.

And read, read, read. I don't see how a responsible adult can get by without Kiplinger's, WSJ, and The Economist.

I'm not sure how much this has to do with the market's recent upswing, but the markets have been transformed on a very fundamental level over the last couple years. Exchanges have gone digital, offering smaller contracts to anyone who can plug money into an account. This has expanded the number of people involved in trading financial markets significantly, creating an influx of capital.

Furthermore, and to everyone's detriment (especially pit traders), it has allowed large brokers and hedge funds to expand the use of black box trading. They use software with clever algorithms that trade based on particular market indicators, and often times are able to hide their large positions amongst the masses in a way they couldn't before. The markets are definitely going through a massive transition right now, and strange behavior has been a part of it, perhaps so are these climbing stock prices.