Today the US unemployment rate rose to 7,9%, and as a result the markets... skyrocketed. This simple instance can show us how crazy has become the world.

What is the market? It is a mechanism of trading economic assets. These assets must follow the trends in the real economy. I.e. when the economy is going well, this means higher profits are expected, and therefore assets must go up. When the economy is going down, everything is the opposite.

But what do we see. We see a bullish jump, after a bad economic data!

Why?

The answer is very simple. The market is evaluating the chance of continuing money-prints by FED in answer to so called "bad economy". So as the unemployment is rising therefore FED will continue with QEs. So let's gain from the inflation of assets :)

But this is not an economy. It is a gamble. Just like the Madoff's ponzi schemes and the concepts of John Law...

The FED unemployment target is 6,5%. As this level is obviously impossible to reach, or at least - impossible to reach via money print stimulus, so the money print itself is granted endlessly. Therefore- buy with cheap money now and sell in future.

But this is not a business. This is just a speculation.

When the market is disconnected from the real economy and real goods and services that real people need, this can lead only to one result - a collision of reconnecting them. An inevitable collision...

Dobri
Feb 1st 2013