The "Wisdom" of the Market

I am not an economist or financier. Whenever I have tried my hand at investing, the stock has almost invariably lost money. My father-in-law had an incredibly uncanny ability to pick the right stocks and seemed to be able to make money on the market when no one else seemed to. He died three years ago next week and I often wonder how he would have done in the recent recessionary market. Somehow or other he managed to figure out the ups and downs - ins and outs - of the market. He always said it was a gamble and you had to be willing to lose money from time to time. He said more than three years ago that the market would fall again.

Well in the past year we have seen one incredible roller coaster. It still isn't over. Even though the market is well up from its way down level, it still tends to move up and down in ways that make no sense. Which is just the opposite of what was supposed to happen a number of years ago when they began taking some of the controls off.

You see, as I have heard it explained, the "free-market" left to its own would always make generally wise decisions. It was controls that caused the problem. The "Market," when left to pure "Market" forces would work out.

What they didn't plan on was that

• there is no such thing as a pure market force
• political situations have more of an impact than thought
• greed is a huge negative force and most importantly of all
• the market is made up of humans who react to situations with a panic.

In short, the "wisdom" of the "market" isn't. It is more reactionary than it is able to have leadership. It depends on others and forces beyond its control to move. But that problem with the market then leads to other forces working against the progress which then upsets the market...

So one day there is good economic news and the market goes up.

The next day the news is mixed so the market goes down.

Next week the news looks really good and the market soars

Then comes the end of the quarter and people want to take a profit and the market drops.

And on and on and on it goes.

As I said I am not an economist but I ask, is this any way to run an economy?

But since I have no answers I will have to let others work on that. But what if, somehow or another, the market decided today that they were going to believe for the next three months that the economy is basically sound and will recover? They would then make cautious investments, but with an eye to a sane and acceptable profit and growth margin.

I know it is too much to hope for, but then maybe I would believe that the "Market" may be able to take care of itself- and the economy.

PS: On Wednesday, after I had written the above, I came across an item on Live Science that reported:

WASHINGTON -- A recent analysis of the 2007 financial markets of 48 countries has revealed that the world's finances are in the hands of just a few mutual funds, banks, and corporations. This is the first clear picture of the global concentration of financial power, and point out the worldwide financial system's vulnerability as it stood on the brink of the current economic crisis.

Maybe the "Wisdom" of the Market is to be found in the decisions of a few who are simply out to make more money.