I'm sure many visitors to this blog probably think I'm being facetious or just plain cynical when I make note of the ignorance of many equity traders and investors.

But I'm not. I actually believe that a lot of these guys (and gals), many of whom are responsible for managing millions or billions of dollars of other people's money, are absolutely clueless about the economy and the world of finance.

In reality, a lot of them have used their one and only talent, sales, to propel themselves into positions that require genuine knowledge and experience -- which they definitely don't have.

That said, I don't think that a lack of intelligence precludes people from being phenomenal traders. One of the best speculators I ever met was only able to carry on a conversation about two things: sports and the opposite sex. But he knew how to read the tape -- and the crowd. And he knew how to control his emotions (a very rare talent, indeed)

Regardless, the following anecdote -- highlighted in a post by Yves Smith at Naked Capitalism, "Stocks Rally on Plan for Government Equity Infusions, Continued Pursuit of Evil Shorts," -- provides a scarily apt description of the individuals who seem to hold great sway over the stock market nowadays.

Perhaps the real reason for the reaction was indirectly revealed in an e-mail message from hedge fund manager Scott, who was mystified at the rally of two days ago and is no doubt even more perplexed today, and saw this anecdote as providing a partial answer:

I‘ve been operating on the assumption that it was just laziness or complacency about risk that kept markets elevated. And now I’m wondering if I need to rethink that, and ask if there’s actually a total lack of awareness of what’s going on, which would obviously change the way you’d think about market pricing and how the market reacts to events.

In any event, my thoughts on today revolved around the fact that AIG was really a binary event—rescue or bankruptcy. The odds in favor of rescue far outweighed those of bankruptcy—I didn’t see how the Fed could let it fail. So call that 80-20, or 90-10, somewhere in that range. But against those odds, it seemed to me that the upside-downside weighed heavily on the side of caution. AIG rescued, 3-5% upside. AIG BK, 10% downside, before the real world ramifications started to seep into the picture. So the fact that the market did so well, with that big unknown hanging over its head, said to me that we are very far from a bottom here. But I thought it was merely complacency about risk that had to be overcome, and now I’m beginning to think that recognition of risk has not even really reared its head to date, astonishing as that thought seems.

olja  oljekrig  oilwars  USA  FED  nyliberalism  nyliberal  neoliberal  skojare  liberaler  kollapsen av nyliberalismen  militär keynesianism  Bush  Clinton  McCain  Förenta Staterna  George W Bush  liberal kris  den osynliga handen  globalisering  internationella förhållande  amerikansk ekonomi  dollar collaps  the invisible hand  neocons  militar speditures  structural crisis trade balance  Globalisation  Globalization  globalism  Globalisering   IMF  world bank  corporate bond equities markets  disarray; the banking system  collapsing  consumer spending  tax revenues  national debt black holes  krigsförbrytare  war criminals  Democracy  liberal democracy  dictatorship  fascism  McBush  11/9  9/11  Palin terrorism  War on terrorism Russia  Georgia  Bush  Putin  south Ossetia  War nuclear  Nato  Election 2008  Obama  McCain  Iran  11 september   Accounting    Asset    Asymmetric information    Autarky    Average cost    Average propensity to consume B   Barter system    Bonds    Budget    Business economics C   Call money market    Capital    Capital Asset Pricing Model    Capital market line    Commerce    Commodity    Company    Corporate finance    Credit    Currency D   Depreciation    Diversification    Duty E   Economics E cont.   Efficient frontier F   Finance    Main Page    Gini coefficient    Microfinance    Price floor    Equity    Financial economics    National stock exchange    Budget deficit    Sample    Financial instrument    Fixed capital    Foreign exchange rate    Future value H   Hedge funds I   Industry    Inter-connected Stock Exchange L   Lending    Loan M   Macroeconomics    Money Supply    Money changer    Money market N   Normal distribution O   Option    Over-The-Counter Exchange of India P   Present value    Price    Product    Profit R   Repo rate    Return on investment    Risk    Risk management S   Secondary market    Security Market Line    Sell    Share    Share certificate    Standard deviation    Stock    Stock market T   Tariff    Taxation    Time value of money  Treasury bonds Y   Yield Z   Zero-coupon bond  Foreign policy law of the United States  imperialism  noninterference  nonintervention  regionalism  axis-of-evil  Bill of Rights  blow-back  budget  capitalism  caucus  civil rights  collateral damage  depression  disinformation  doublespeak  fascism  free speech  free enterprise  Federal Reserve System  FDIC  globalization  mpeachment  inflation  laissez-faire  MSM   Mainstream media  Neo-liberalism  Neo-conservative (Neocon)  New World Order  outlays  POTUS  propaganda  privatize  recession  revenue enhancement  republic  SCOTUS  Supreme Court of the United State  SEC  social security  subsidy  think tank  tyranny  terrorism  unilateralism  Weapons of mass destruction  antiterrorism  expansionism  geopolitics  neocolonialism  neoliberalism  ultraconservatism  Dollar Collapse  Credit Default Swap  CDS  Credit derivatives finance  Credit-default swaps on Fannie and Freddie  Credit Default Swaps and Financial WMDs trade  quote market  dealer  the bid  strategy  investors  lower the overall cost  shares   principal  mortgage  outstanding. Average life    weighted-average time   receipt   future cash flows  using as the weights the dollar amounts  principal paydowns. Average maturity The average time to maturity  securities  mutual fund  Changes in interest rates  bondholders and stockholders  Dow Jones Industrial Average  contract  financialoptions contractstraded  Corporation  financial institutions   bids  offers  tradedbonds  bond government agency   corporations created  manage a revenue-producing public enterprise. authority bond  municipal bond  margin protections  incorporated  authority bond contract  institutional investors  transact block business  purchase  sale   security  Markets   price   free interaction of prospective buyers  sellers floor  stock exchange  stocks preferred  dividend discount model   share  equity  low price-earnings ratios  high dividend yield  futures and options  contract  executed  exchanges   closing period  taxpayer  cash flow   risk  profit   asset value exceeds market value  A security  collateralized  Stock Price Riskless Indexed Notes. Zero-coupon four-year bonds repayable  security   commodity  financial_institution   syndication. This implies the entity that agreed and negotiated the project financing structure  bank  underwriter entitled to syndicate the loan or bondissue  convertible arbitrage index arbitrage  and international arbitrage  profits differences  price  extremely similar  security  currency  commodity  traded  two or more markets  Lower-rate refunding issue proceeds  invested Treasuries  first call date  interest rate Preferred Stock  equities  call provision in a municipal bondindenture   right of redemption  issuer  interest payment  general equities  order to buy or sell  quantity of stock  convertible securities. Interest  accumulated  market value  discount bond  liability  pension plan  strategy  available information forecasting techniques  better performance  buy  holdportfolio  asset  protected  potential loss  insurance  hedging Adjustable rate   convertible securities  interest rate   dividend adjusted standard market rate  outside control of the bank or savings institution  Treasury bonds  notes. Bush  McCain  Obama  Imperialists  hegemony  american century  pax americana  Palin  Finanskris  kreditkris  dollarraset  olja  oljekrig  oilwars  USA  FED  nyliberalism  nyliberal  neoliberal  skojare  liberaler  kollapsen av nyliberalismen  militär keynesianism  Bush  Clinton  McCain  Förenta Staterna  George W Bush  liberal kris  den osynliga handen  Bernake  Greenspan  kreditkrisen  finanskrisen  bankkrisen  konsument krediter  skuld  nationell skuld  räntenivå  recession  konjunktur strukturell kris  national debt handelsbalans utlandsskuld  nykeynesianism; internationell ekonomi  ekonomiskt läge  globalisering  internationella förhållande  amerikansk ekonomi  bankväsendet  finansmarknad  avreglering  pension  globala rånet  nyliberal skojeriet  neoliberalism  neocons  financial crisis  bank crisis  recesion  depresion  economics  voodoo economics  freakonomics  Federal reserve  Dollar Collapse  neokeynesianism interest rate  obligations  CDOs  state obligations  economic colapse  the dollar empire  monetary policy  national debt  state debt  credit crisis  credit card  mortgages structured investment vehicles   financial asset   credit crunch  Bank of England   financial panic   Individual Voluntary Agreement   toxic packages   sub-prime mortgages  privatization  deregulation  foreign debt  dollar asssets  dollar collaps  the invisible hand  neocons  debt mortage loans  mortage debt  consumer debt  bonds  trasure bonds inflation  consument price index  producent price index  energy price  oil price  bonds price  stocks  stock  Wall Street  financial markets  militar speditures  structural crisis trade balance  Globalisation  Globalization  globalism  Globalisering   IMF  world bank  corporate bond equities markets  disarray; the banking system  collapsing  consumer spending  tax revenues  national debt black holes  Closed Economy The Black Economy  Recession  Leverage  Treasury Bill  Asymmetric Information  The Long Tail  Demand Forecasting  Monetization  Monopoly  Monopsony  Duopoly  Oligopoly