The Flinchum File

Thoughtful Economic Analysis and Existential Opinions
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Welcome to the Twilight Zone

Republicans use the word “taxes” too much.
Democrats use the word “fairness” too much.
Existentialists use the word “absurd” too much.

Thursday’s market convulsion was absurd, losing 354 points!  Yes, yes, it was partially due to bad data coming out of China, but it was primarily due to the absurd reaction of U.S. traders (not investors) to Ben Bernanke’s press conference on Wednesday.

In the real, rational world, the stock market would go up whenever the Fed Chairman says the economy is improving.  In the Twilight Zone, the markets goes way down simply because the Chairman repeats that he will begin phasing out quantitative easing when the economy gets better, and, by the way, the economy is getting better.  That started the sell-off — before he even finished speaking.  The approaching change in monetary policy increased uncertainty, which always drives down stock prices, but the magnitude of this price drop was absurd.

It is absurd when the stock market goes down . . . because the economy is improving.