Why does the market defy rationality?

Quote from dearinfinity:

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Specifically, why are financials and REITs surging on the homebuilder index, while mortgage foreclosures are soaring and the moratoriums are ending?

Which humans are accounting for these surges? Moms and pops? Average people? I find it hard to believe that at this point the major market movers are still responsible for the rally. What is the breakdown of % volume of joe person vs. fund? Why would private funds who understand--or should, at least-- how poor the fundamentals truly are, risk by buying into this kind of market? Who is convincing the middle class to pour their cash back in?
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Not trying to be rude...but, you don't seem to have an understanding of the PPT!!! Go do research on the "President's Working Group on Financial Markets" - aka the Plunge Protection Team - the market is being manipulated these days - provably manipulated. Soon after this post there will be some dingleberries who deny the existance of the PPT - I have proven that the New York Fed is playing in the money markets. The "Fed" buying long bonds - the US gov't manipulating the Bond markets. The equities...search for a recent thread on this board that included the word "scared" and follow to a link about liquidity and the "big players" in liquidity...the guy mentions evidence of the PPT playing in the equities markets.

This whole "rally" is a market manipulation - what others will tell you here is - trade the market "volatility" and earn money that way...if you "think" you understand market movements...you are wrong...what they won't tell you is WHY - the "WHY" is that the markets are manipulated!!!

-gastropod
 
Quote from lindq:

Efficient-market hypothesis
From Wikipedia, the free encyclopedia
In finance, the efficient-market hypothesis (EMH) asserts that financial markets are "informationally efficient", or that prices on traded assets, e.g., stocks, bonds, or property, already reflect all known information. The Efficient Market Hypothesis was developed by Professor Eugene Fama at the University of Chicago Booth School of Business as an academic concept of study through his published Ph.D. thesis in the early 1960s at the same school. It was widely accepted up until the 1990s, when behavioral finance economists, who were a fringe element, became mainstream.

Bite me.
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What you just quoted is what you wrote in your first paragraph in different words, but the meaning is the same. So you proved and agreed that market is efficient, as defined in above and in your own explanation of prices as related to future.

It would be good if you can write what efficient market means to you, in your own words. Maybe you may be thinking market is inefficient according to some rules in your mind. Only you knows what is inside your head.
 
The truth is, the banks are being given huge sums of free capital and lending it out at large spreads. They now have so much cash that they are buying up underpriced liquid assets. Where can you find the most liquidity? The stock market. Watch the dow roar to 10k within the next 2 months.
 
Quote from RiceRocket:

The truth is, the banks are being given huge sums of free capital and lending it out at large spreads. They now have so much cash that they are buying up underpriced liquid assets. Where can you find the most liquidity? The stock market. Watch the dow roar to 10k within the next 2 months.
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10:1 against. Place your bet.
 
Market is a deranged, demented mob.

Imagine any institution consisting of big time players, people who watch cramer for info, day traders, momentum traders, short sellers, people who buy and hold, people who had a particular dream, people who trade on a "hot tip", etc. The sum of all those participants is not some profound oracle, it is garbage. If you try to find sense in the market you already lost.
 
Why does the market defy rationality?
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It doesn't.

The first week of March, Our President of the United States, said "now is the time to buy stocks". It doesn't get any simpler or more rational than that. The Oracle of DC has spoken. Check your chart of the Dow.

Ever notice how Buffett buys a stock and it tanks, then bada bing bada boom (GS comes to mind yuk yuk) up it goes. Well the same thing happened when Obama made that statement.

Stay tuned.....
 
Quote from dtrader98:

Welcome to the way the markets operate.

If you are just starting out, learn to separate rational logic with what is actually happening.
If the markets are soaring on horrible news, it is telling you something that you should not try to fight by sheer logical inference.
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Newbies frequently fall into the trap of thinking that the market has a 1:1 correlation with the fundamentals of the Economy.

Turn off your tv set.
Turn off your brain.
And simply observe and trade PRICE.
Because that's what you get PAID on!

Don't try and rationalize.
That's the way to the poor house for a Trader.
:)
 
+10000000

Quote from Landis82:

Newbies frequently fall into the trap of thinking that the market has a 1:1 correlation with the fundamentals of the Economy.

Turn off your tv set.
Turn off your brain.
And simply observe and trade PRICE.
Because that's what you get PAID on!

Don't try and rationalize.
That's the way to the poor house for a Trader.
:)
More...
 
Quote from lindq:


This is why the "efficient market theory" is so wrong. It generally states that everything that is known is already priced into the market. But it leaves out of the equation an important factor often influencing pricing, which is expectations. And they aren't quantifiable.
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Future expectations are based on current information though. Once new information comes out people revise their expectations for the future based on that information so efficient market theory isn't completely out to lunch.

And expectations are quantifiable to a certain degree by the way of analyst estimates etc. Future expectations could also be quantified by the moves in the stock market. If it goes green, expectations have risen. Red, expectations have fallen.
 
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