Comments on: Market hackers running out of ammo http://polizeros.com/2007/10/15/market-hackers-running-out-of-ammo/ Musings on politics: anti-war, global warming, peak oil and otherwise Mon, 08 Sep 2008 08:31:07 +0000 http://wordpress.org/?v=abc By: Bob Morris http://polizeros.com/2007/10/15/market-hackers-running-out-of-ammo/#comment-144332 Bob Morris Tue, 16 Oct 2007 00:04:04 +0000 http://polizeros.com/2007/10/15/market-hackers-running-out-of-ammo/#comment-144332 Also, if major Wall Street brokerages and investment houses went belly-up, all the businesses that supply them and the stores nearby would take a major hit too - something that just happened in Orange County when several mortgage companies went bankrupt. Also, if major Wall Street brokerages and investment houses went belly-up, all the businesses that supply them and the stores nearby would take a major hit too - something that just happened in Orange County when several mortgage companies went bankrupt.

]]> By: DJ http://polizeros.com/2007/10/15/market-hackers-running-out-of-ammo/#comment-144328 DJ Mon, 15 Oct 2007 16:56:50 +0000 http://polizeros.com/2007/10/15/market-hackers-running-out-of-ammo/#comment-144328 For businesses relying on credit, this is doubtless an issue-- while businesses lending money will prosper. Obviously there are more of the former, else the problem would not exist. Ultimately, though, the drying up of cheap credit is the predictable outcome of the credit binge of the Bush administration. Like other scarce resources, credit has a limited supply and cost reflects demand. Just as the price of brass and copper has risen because of the billions of rounds of ammo going to Iraq, government's ravenous consumption of credit can't help but affect the market. For businesses relying on credit, this is doubtless an issue– while businesses lending money will prosper. Obviously there are more of the former, else the problem would not exist.

Ultimately, though, the drying up of cheap credit is the predictable outcome of the credit binge of the Bush administration. Like other scarce resources, credit has a limited supply and cost reflects demand. Just as the price of brass and copper has risen because of the billions of rounds of ammo going to Iraq, government’s ravenous consumption of credit can’t help but affect the market.

]]> By: Bob Morris http://polizeros.com/2007/10/15/market-hackers-running-out-of-ammo/#comment-144326 Bob Morris Mon, 15 Oct 2007 16:10:17 +0000 http://polizeros.com/2007/10/15/market-hackers-running-out-of-ammo/#comment-144326 As I see it, the underlying problem in the market is the credit crisis which was triggered by the subprime debacle. Credit is increasingly difficult to get, and that raises business costs. Also, major portions of the credit market have just locked up. Such crazed trading is a result of this, the cheap credit party is over, and quants increasingly desperate to make profits. As I see it, the underlying problem in the market is the credit crisis which was triggered by the subprime debacle.

Credit is increasingly difficult to get, and that raises business costs. Also, major portions of the credit market have just locked up. Such crazed trading is a result of this, the cheap credit party is over, and quants increasingly desperate to make profits.

]]> By: DJ http://polizeros.com/2007/10/15/market-hackers-running-out-of-ammo/#comment-144318 DJ Mon, 15 Oct 2007 14:40:14 +0000 http://polizeros.com/2007/10/15/market-hackers-running-out-of-ammo/#comment-144318 While I agree that some market moves are illogical, I don't see how this translates into a seriously detrimental effect on companies outside the trading world. For example, if XYZ announces a gigantic loss, whether or not anyone buys its stock is largely irrelevant to its internal operations. It either gets on the stick and does a turnaround, or it fails. That's not market driven. Only if XYZ needs to raise money by selling stock does the market come into play. Likewise if the opposite happens (PQR has great fundamentals but the market sells), if anything this is actually a plus, since PQR can repurchase its own stock at undervalued prices, reduce dividend overall payments, and be even more competitive than before. As I see it, a collapse in the market is more likely to have an effect on pension plans and disposable consumer income. This WILL affect companies and their bottom line, but through indirect economic effects and not through the market itself. While I agree that some market moves are illogical, I don’t see how this translates into a seriously detrimental effect on companies outside the trading world.

For example, if XYZ announces a gigantic loss, whether or not anyone buys its stock is largely irrelevant to its internal operations. It either gets on the stick and does a turnaround, or it fails. That’s not market driven. Only if XYZ needs to raise money by selling stock does the market come into play.

Likewise if the opposite happens (PQR has great fundamentals but the market sells), if anything this is actually a plus, since PQR can repurchase its own stock at undervalued prices, reduce dividend overall payments, and be even more competitive than before.

As I see it, a collapse in the market is more likely to have an effect on pension plans and disposable consumer income. This WILL affect companies and their bottom line, but through indirect economic effects and not through the market itself.

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