In the Hands of Children

The markets ended a bruising week with a significant drop today – the Dow down 178, Nasdaq 33, and the S&P 20. It is bad enough to watch the value of one’s investments drop so precipitously. It is worse still to hear that the momentum down was caused primarily by surprise that inflation is very much a reality and by worry about its impact on future Fed decisions. In fact, a mid-day AP article was entitled Stocks Fall on Startling News about Inflation. What on earth is startling about the huge bite inflation is and has been taking on our lives for months now? Only children keep their heads in the sand. No grown-up breathing today can be unaware of inflation’s continuing and ever growing presence. Market movers have got to be kidding – or they are absolutely stupid – to react with surprise to data simply confirming the obvious.

The data showed that consumer prices increased by 0.8%, topping an expected 0.6% rise. The report also showed that the core rate (excluding food and energy prices) also rose 0.3%, its biggest increase in 10 months. Surprise!! If you are living in this world and buying and paying for daily necessities, you know all this. And, it certainly ought to have been priced already into the markets. But traders and other jerks were just looking for an excuse to pull the plug – as they do so often. And, “startling” inflation increases were just the latest excuse.

It is annoying that the core inflation rate is taken seriously – even though it too has finally begun to increase. It is about as artificial a measure of inflation as could possibly be constructed. Food and energy are big parts of everyone’s lives, and affect our spending behavior more than any other inflation indicators. And, again, you can’t have been alive these last many months without knowing – well before the reports came out – that we are in the midst of very serious inflation.

So, if the markets were really responding the data simply confirming the obvious, then they are truly in the hands of children. And, if that is so, no one in his or her right mind should be participating in markets controlled by children. I have begun to believe that children are at the helm, and I am fast believing that one must get out of the stock markets until such time as reason and adults take control again. .