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This is a question that I bet many people are wondering. Well the truth is yes to both parts. We are either in or close to being in a recession. But at the same time the stock market seems to be doing quiet well.  We are seeing more than 3 up days each and every week. This is amazing!

I have a friend who keeps complaining that he keep loosing money trading stocks. Well, his reason is that he loves to “Short stocks” which is basically a method of borrowing stocks for a higher price and then selling them back for a lower price, and you get to keep the difference. He thinks the market is about to go down, but it does not. So he ends up loosing money.

This is probably because the stock market buys on the news. What this means is that just because the news tells you that we are in a recession, the individual companies that make up the stock market are not, or if they are, they are not showing it yet.  Maybe the Bear Stearns deal is holding things together. But also there are the market makers who are able to keep the market up, as long as possible to keep us from falling into a more severe recession.  Maybe that is ok for them, but in some ways this is hurting us. A good stock market day usually gives banks an excuse to raise the mortgage rates and if they keep going up, that will really create a deeper recession. As I can see this is all a big game.  I think they are waiting for me to invest again and then they can take me for a roller coaster ride, like I did a few years ago.

Only the future will tell. But 2 things are almost for sure. These daily market rallies are either a temporary pattern that will soon fade, and then we will see a huge sell off. Or, If not we may just see a stale market for a long while.  

This entry was posted on Monday, April 7th, 2008 at 2:31 pm and is filed under Stock Market, Economics. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.