The Stock Prices Continue Downward … Here Are a Few Ideas About It

In the media, they all knew it beforehand. And today, they spend all day moving here and there – between relaxing and extreme anxiety. For instance, on ARD.de they wrote today

Börse reagiert hochnervös auf S&P-Abstufung

(Stock market reacts super nervous to S&P degrading)

And everybody knew the reasons, too. It was the degrading of the debtor USA by S&P. And our good EU commission president José Manuel Barroso was also to blame, because he openly (and even publicly) admitted an absolutely justified fear.

Except I do not understand why those two (S&P and Barroso) are now made the scapegoats.

For a rating agency to have awarded the USA the classification AAA on a scale from AAA to D (with any number in between) has been ridiculous for quite some time, hasn’t it? Incidentally, the same is true for the now again far too good AA+, which still is said to be the main reason for the uneasiness of all stock market players!?

Poor Mr Barroso is also said to be to blame. Here is an excerpt from the SZ article on the topic:

A very adverse wind is blowing for EU commission president José Manuel Barroso. Last Thursday, he demanded an evaluation of all elements relating to the rescue umbrella EFSF, including its financial equipment. This Portugese appraoch has now provoked persistent criticism – through all political parties and especially from Germany.

And holding it against a man like Barroso that he actually said the EURO umbrella might be too small in dimension is also rather strange. After all, everybody knows that it is impossible to build a rescue umbrella that can even protect the PIGS countries against higher interest rates (and thus their EXODUS). Again, it seems that the only (slightly) honest person is the one who takes the beating.

Yet a few ideas still come to mind:

On page one in the economy section of the Sunday FAZ, you could find a table: Allegedly, Portugal is indebted to the tune of 83.3 per cent of its 2010 GDP. Well, that is a number that does not really tell me very much, does it?

A few lines down on the table, however, you will find that Germany is indebted to the tune of 80 per cent of its 2010 GDP. Now I am afraid our debt (even if I close my eyes against all the guarantees) increased dramatically in 2011. And if we have to finance more rescue umbrellas, then matters are quite likely to continue in the same manner, aren’t they?

And then I think our GDP is probably several times higher than that of Portugal. In other words, we rich Germans have a lot more debt than the “poor“ Portuguese. What would happen if one of those brillliant rating agencies were to look behind the sparcling facade and steal our AAA? Then our ever so competitive interest rates could climb. That would mean I could really get scared – except that I have long ago stopped believing that our ”point of no return“ could still lie in the future.

If, however, I then return to thinking of the DAX, then the question comes to mind:

Why did none of the heads of government start worrying when the DAX kept climbing?

They might have called for a conference in order to stop the stock prices climbing! After all, everybody knows that, due to the dynamics of the time, the amplitudinal frequency gets more frequent and more dramatic, not just in our economic life. And the higher the stock prices, the more dangerous life gets.

If stock prices climb, you do not build up a fortune. Just like now no fortune has been destroyed. Hasn’t the stock market degenerated to becoming nothing more than a non-relevant roulette table in the great financial casino a long time ago?  At the other tables of the financial casino, far more sinister games than the stock price roulette are played. The comparison with normal casinoes, however, is not appropriate, because you can be sure that they play more honestly than the great financial casinoes of this world.

In  my opinion, the stock market games are grossly overrated. That includes what happens today. The only real thing about is that some few rich people earn a lot of money and some financiers can earn their next Ferrari.

That is why I will not worry. Instead, I will look upon the current situation with the same joy as I saw the 0:1 of “Bayern München” against Mönchengladbach. The Bavarians need no Ferraris, because they have Audis. And they want to use their loads of money to buy another championship. What they – unfortunately – forgot is that you need a team and some character in order to play successful soccer.

Well, the news from the stock market are just as important, or rather just as unimportant, as the reports on the soccer league. I find the second league more interesting.

RMD
(Translated by EG)

P.S.
All that matters is for Haching to win (Offenbach – Haching 1:4).

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