Nonsensical stock market

The banks are still ailing, the second wave of foreclosures is about to hit, unemployment is rising, yet the stock market is soaring.

This of course makes no sense. We are probably still in a bear market rally and things may well come crashing back to earth soon.

But I’m not buying puts or going short yet. Those who did are getting killed right now.

Why does the stock market not follow the general economy?

3 Responses to Nonsensical stock market

  1. Jonathan Lundell Thu, May 07, 2009 at 3:01 pm #

    Read Keynes’s General Theory Chapter 12.

  2. UJ Thu, May 07, 2009 at 3:56 pm #

    Uh, because it never did? Contrary to what TV says, the stock market is not an approval rating or high score of the economy. It’s the stock market. It measures stocks. There’s more to “the general economy” than Wall Street.