Heartless mother

You'd think, with bad manufacturing numbers and tales of oil price pressures coming in before Katrina (http://quote.bloomberg.com/apps/news?pid=10000103&sid=aFduHjC9ASjw&refer=news_index), and the all the destruction and human misery brought about by Katrina, that the stock markets would show a little caution and some respectful constraint, if only to appear to be concerned for the human hardships. But no, the market is always looking to tomorrow and only suckers get trapped by the pain others are feeling today. (Note I said the pain of others: boy, the NYSE sure went into meltdown when the pain landed on their doorstep on 9/11).

This chart shows you that, by its own internal dynamics, the Dow Jones Industrials Index was drifting lower as Katrina approached New Orleans, and nothwithstanding the battering it did to Florida along the way. But then, when (on 30 Aug as shown on the chart) it hit the heart of the oil and gas fields and the Mighty Mississippi River transportation hub straight in the mouth, which, disregarding the human suffering altogether, you would think would send a shuddering blow across the chops of the economy, what do the Wizzes of Wall Street do? Why, they buy like happy days are here again.

Here's what one of the Wizzes had to say about that: "Rather than just accepting my explanation that the Plunge Protection Team was aggressively buying S&P index futures, it is worth considering the explanation I received from one of my email buddies.... Apparently anybody who is short the market right now can be classified as dumb money because small traders have not been this short compared to specialists since 1943. Not even in the ’73 – ’74 time frame, when they did not have options, meaning if you wanted to be short stocks, outright sales of borrowed stock was the only method, have small traders been this short. So, not only do you have stubbornly high index related put / call ratios because of speculators and hedging strategies by the funds, we also have the small trader reading about the increasingly bad news out there and getting short like never before. Thus, a floor is put in place for stocks against the backdrop of generous liquidity provided by the Fed, and even if there is an unexpected hiccup to the downside, it’s a buying opportunity. This of course explains why the CBOE Volatility Index (VIX) remains lows, not to mention the fact speculators are long call options on this index as well, meaning in it’s own right, prices will not rise until this condition is burned off. We must congratulate the banker boys on bringing out options on the VIX. That was a stroke of genius in terms of perpetuating the squeeze. Bravo. It used to be easy making money shorting the market before conditions matured to this point, but now it’s hard. The competition is now so intense, largely brought on by the hedge fund industry, where their hedging strategies are a large part of the reason stocks remain buoyant to this day, that market returns have flattened out, causing investors to pull their money out of these heavily leveraged plays, often in favor of real estate these days. One would think that with money flow coming out of the stock market that prices would go down. But, of course it appears this process may just be starting, so in the meantime stocks can get squeezed higher...." http://www.financialsense.com/Market/hartman/2005/0831.html

And the more conspiritorial or paranoid might want consider the possibility of other "guiding hands": http://guambatstew.blogspot.com/2005/09/calvary.html

And you thought that Katrina was a b*itch.... Small traders may be feeling empathetically down off the human misery caused by Katrina, but the Big Boys have no such emotion and are setting up the small guys for a big squeeze. You can only hope the rocket scientists have miscalculated, which they have done from time to time.