Adam Smith, Say Whaaat?

        Yesterday, as the election results were solidified, there was a momentary dip in the US financial markets, followed later in the day by a rally to a new high. The dip triggered a slew of panic warnings, which of course when the rebound occuerred seemed odd. What is interesting is that there was absolutely no "supply/demand/price....whatever" driver of this. It was based on sheer speculation and imaginary forces of the political winds. 

       Adam Smith would stand mute before the "Big Board" of  the DOW, FTSE, or Nikkei (also up 7% +!), in a daze of "What the f**k am I seeing here?"  In "...Wealth of Nations" generally considered the first scientific analysis of economics, Smith dealt with concrete concepts such as surplus/shortage, supply and demand, and how they affect markets , prices and even national priorities.

        Looking at the internet in the present, we have seen prognostications of everything from a booming market to  worldwide panic, not based on the recent election , but on "experts" (persons  with a briefcase who make money on your money)  simply giving best guess advice for free, usually followed by the offering that they, and only they, have the secret that will keep your money safe. Trust them!

        While many of us know of Michael Lewis' book "The Big Short" and have seen the movie, it is his first book on finance, "Liar's Poker," which lays out in print some sobering  reality about who handles your investments and how and why. Follow this with a reading of "Confessions of an Economic Hit Man" by John Perkins. After doing these two chores you will, or should,  have  a better understanding of how much modern markets have left the realm of  "I have it, you need it, how much will you pay?" and entered into an alternate universe plastered with "what if?"

        It is this sort of what if/maybe so economics which led to the housing bubble collapse of 2008. What should not be forgotten in all the uproar is that in most cases of this nature, someone may lose, but others are positioned to win. Unfortunately, the losers are far more likely to represent institutional investors managing either private individuals savings or pension funds and similar instruments.  

        I write this because it appalls me that personal finances can be ruined by innuendo and fear, rather than real world economic shifts. From today's DOW and Nikkei, both up big and the very slight dip in London's FTSE,  apparently the Chicken Littles who play God with world financial markets have yet to be struck by a piece of the sky.