Handbasket Report — Financial News Section — Where There’s Smoke, There’re Mirrors

As I watched the wild upswing of the American stock markets today, I was wondering what I was missing.

Luckily, I read The Automatic Earth blog (noted on our list on the right) almost daily.  Today’s entry started with a concise explanation of today’s market events:

Wherever I look this morning, Asia, Europe, Wall Street, I see journalists and analysts claim that bargain hunters are causing the rising stock prices. They’re not. There is something different going on.

Prices these days fall when and because large investors need to sell assets in order to get cash. Prices rise when large investors need to cover their shorts.

The investors involved in both cases are largely identical, though not entirely. It’s important to understand that while, obviously, price drops cause loss of capital, price rises are now the result of the same. Everybody still tries to hide their losses, but it’s getting much harder.

Becoming both more enlightened and more depressed used to take a lot longer before the Internet.

Cassandra

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