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Stock Traders – Oblivious or Stupid?

After hearing yet another professional stock guy on CNBC mention QE3 like it was still a real possibility, I have to ask the question:

Are these guys completely oblivious, stupid, or in just simply in denial?

The thing that had me laughing yesterday (it was either laugh or cry) was how completely out of touch this one trader clearly was. His reasoning for being bullish on stocks is that we’re in a win-win situation. We’ll either get good economic growth or QE3, he suggested.

Wow! Really? Those are the only two possible courses? Might want to re-think that. And this was a professional on the floor of the NYSE!

I don’t know what these stock guys are looking at or paying attention to, but it’s not the same stuff the fixed income and forex folks are following.  Those of us in the latter markets heard Bernanke say at his press conference that it would take something very significant for the Fed to embark on QE3 as he feels the inflationary risks outweigh any potential benefit. This has been backed-up by other Fed speakers since, and the minutes from the last meeting of the FOMC, released yesterday, focused a lot on exit strategy.

Either a strong economy or QE3? It’s that sort of brilliant analysis that confirms the view of fixed income and forex market folks that the equity markets are always the last to figure things out. Remember how stocks rallied right into October of 2007 even after it was clear months before that from what was happening in interest rates and currencies that something was very wrong?

By John

Author of The Essentials of Trading

6 replies on “Stock Traders – Oblivious or Stupid?”

Floor traders hold their opinions until paper moves against them;so macro thoughts only exist in the ether of their world.

I do hear a lot of the reasoning you mention through out my discussions during the day (QE3 or no QE3, that is the question). I believe many to be lacking defensive posture should their limited views be wrong.

Tito – I totally get what you’re saying about the floor traders being focused on order flow. I don’t know the specific focus of this guy on CNBC yesterday, but he clearly had a macro view. It’s just so funny to hear the stock guys on CNBC (and not just the traders) still talking about QE3 when the bond and currency guys gave that one up weeks ago (if not longer).

It will be interesting to see how it plays out. I believe the odds favor a QE3.

I’m marking this post as a reminder for some time late this year…

DEvry – Glad to hear someone’s out there to keep me honest. We need more of that in the blogosphere. 🙂

On what basis do you say the odds favor QE3?

Floor traders are morons. At best they were order monkeys – at worst, front running thieves. The only thing dumber than a floor trader would be Maria or maybe Bob. Long live the NYSE floor, the AMEX floor!

“Compooters? Vinny what are those?” – Any Floor Trader

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