Stocks down on strong economic news

The top Yahoo Finance story paints a much better-than-expected picture of our economic and political future. Yet stocks are currently down a bit in the U.S. and even more internationally. What gives?

The very emotionally unsatisfying answer is that I really don't know. If stocks close lower today, the media will certainly come up with an explanation. Perhaps it will be one of the following:

-- Market down as investors don't see the right kind of job growth

-- Market down on continued European debt worries

-- Market shrugs off good news and sees more bad times ahead

The lesson: In reality, the market is a complex organism that isn't always easy to predict in hindsight. It fools the so-called strategists daily, monthly, and year after year. Remember the S&P downgrade of the US Treasuries followed by soaring Treasury prices? The annual forecasts produce constantly dismal results.

So the next time you hear an economist making a prediction, remember two things:

-- He is unlikely to be right

-- Even if he is right, you may still lose money in the market

Admit you have a prediction addiction. Just don't act on it. Have a little chuckle when you see the media explain the market results each day.

[rkagrawala]

(Saw this today and had to share...)

Stockwatch

Converse Shoes (CON)

$6.58 (-$0.32) (+4.6%) Shares fell when the company's quarterly report revealed the lack of punk bands forming in 2011 had caused sales of the shoe manufacturer's popular Chuck Taylor brand to fall to its lowest level since 1997.

Source: The Onion
http://www.theonion.com/articles/converse-shoes-con,27076/

[jeannutson]

Maybe the market is only trying to be realistic and futuristic the good news about the reduction in unemployment is for last year and not this current year.

[Allan_Roth]

I think your explanation is as good as any. I also think the bottom line is that we really don't know.

[RichZubaty]

The answer here, media mavens, is that the stock market is manipulated by traders. Traders only make money when there is volatility in the market so they make rumors that create volatility.

All the reasons you are given -- and therefore give us -- for why stocks go up and down, are specious. Based on fantasy. Our entire economy is manipulated by Wall Street traders, making commissions and front running big institutional buys with their light-speed computers. Our entire financial services industry is a fraud.

[Allan_Roth]

RichZubaty,

I hear you on the Wall Street criticisms and would like to think of myself as one of the strongest critics. Yet, simple math must prove you wrong. For there is a party on both sides of every trade. If one trader profits from creating a rumor, another must lose.

Two ways of being immune to daily volatility are:

1) stay out of the market
2) invest for the long-term

I pick option 2).