The Marvel of the Stock Market

By subdividing private property into miniscule shares, capitalism has allowed the masses to own the means of production in a way that socialism never could.

The stock market numbers give us the sum-total of millions of individual decisions, which form an aggregate that affects the whole economy. The stock market also lets us see the laws of price and demand and other economic forces working seemingly instantaneously.

Anyway, yesterday on Wall Street was something to behold: Following a world-wide collapse on the previous day, when the American markets were closed, stocks, as predicted, followed that trend, dropping 300 points. But then, people seeing that they could get blue-chip properties really cheap, started buying. And buoyed by an interest rate cut from Treasury, they kept buying. The market ended 300 points up. That would be 600 points from what it was in the middle of the day!

About Gene Veith

Professor of Literature at Patrick Henry College, the Director of the Cranach Institute at Concordia Theological Seminary, a columnist for World Magazine and TableTalk, and the author of 18 books on different facets of Christianity & Culture.

  • http://gpiper.org/katiesbeer Theresa K.

    That is a great explanation of how the stock market works!

  • http://gpiper.org/katiesbeer Theresa K.

    That is a great explanation of how the stock market works!

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  • WebMonk

    Well, it’s not quite like that. On Monday, overseas markets had a major crash based mostly on their expectations of a US recession. Most of these crashes were by 5 to 7 percent and some were quite a bit more – that’s the equivalent of a 600 to 800 point drop in the .DJI

    To avoid a nasty crash, Ben Bernake and the rest of the Federal Reserve Board made an emergency rate cut of .75 points in the prime rate from 4.25% to 3.5%. This was enough of a stimulus to the market that instead of dropping 600-800 points, it only dropped 128 points.

    Upon seeing that the US market was doing OK, and on estimation that the unexpected rate cut would help keep the US economy from a recession (or at least keep the recession small and short), overseas markets rebounded. Other overseas financial and government institutions made similar types of moves as our Fed did – they did their equivalent of cutting rates.

    Now the Fed has been scheduled to meet on the 29th and 30th of January, and where the markets were originally forecasting a .50 to .75 point cut, the markets are now buoyed by the fact that the Fed has already made a .75 cut and is expected to make another cut of .5. Combine this with the fact that most of the overseas markets closed well up by the time it was the middle of the day here, the stock market made a big jump.

    The jump was definitely NOT caused by individual investors though. Individual investors, even including small business investment funds, only make up a small fraction of the market activity. The biggest movers yesterday afternoon were a couple of overseas national investment funds (Saudia Arabia was one of the biggest) and some of the major US funds. When they started buying in with over $10 billion, the market jumped.

    The jump was helped because a lot of “short” investments (investments that bet the market will go down) started cashing in en-mass when the market had dropped to 250 below opening.

    I agree that the stock market is great because it lets people invest in public companies, but the movement yesterday wasn’t based on common individuals deciding that it was a good time to buy.

  • WebMonk

    Well, it’s not quite like that. On Monday, overseas markets had a major crash based mostly on their expectations of a US recession. Most of these crashes were by 5 to 7 percent and some were quite a bit more – that’s the equivalent of a 600 to 800 point drop in the .DJI

    To avoid a nasty crash, Ben Bernake and the rest of the Federal Reserve Board made an emergency rate cut of .75 points in the prime rate from 4.25% to 3.5%. This was enough of a stimulus to the market that instead of dropping 600-800 points, it only dropped 128 points.

    Upon seeing that the US market was doing OK, and on estimation that the unexpected rate cut would help keep the US economy from a recession (or at least keep the recession small and short), overseas markets rebounded. Other overseas financial and government institutions made similar types of moves as our Fed did – they did their equivalent of cutting rates.

    Now the Fed has been scheduled to meet on the 29th and 30th of January, and where the markets were originally forecasting a .50 to .75 point cut, the markets are now buoyed by the fact that the Fed has already made a .75 cut and is expected to make another cut of .5. Combine this with the fact that most of the overseas markets closed well up by the time it was the middle of the day here, the stock market made a big jump.

    The jump was definitely NOT caused by individual investors though. Individual investors, even including small business investment funds, only make up a small fraction of the market activity. The biggest movers yesterday afternoon were a couple of overseas national investment funds (Saudia Arabia was one of the biggest) and some of the major US funds. When they started buying in with over $10 billion, the market jumped.

    The jump was helped because a lot of “short” investments (investments that bet the market will go down) started cashing in en-mass when the market had dropped to 250 below opening.

    I agree that the stock market is great because it lets people invest in public companies, but the movement yesterday wasn’t based on common individuals deciding that it was a good time to buy.

  • WebMonk

    Oh, and one of the other things that really added some more punch to the upswing was that word got out that insurance regulators were meeting with several major Wall Street firms to talk about potentially bailing out some big bond insurers.

    Bond insurers are essentially the insurance on a LOT of financial tools, and they were in a shaky position because of the degradation of the value of the tools they were holding by the housing market collapse. Firming up the financial strength of the insurers helps to strengthen the things they insure, and just generally make a safer environment for investments – markets like safety.

  • WebMonk

    Oh, and one of the other things that really added some more punch to the upswing was that word got out that insurance regulators were meeting with several major Wall Street firms to talk about potentially bailing out some big bond insurers.

    Bond insurers are essentially the insurance on a LOT of financial tools, and they were in a shaky position because of the degradation of the value of the tools they were holding by the housing market collapse. Firming up the financial strength of the insurers helps to strengthen the things they insure, and just generally make a safer environment for investments – markets like safety.

  • fw

    I see greed and covetousness on the level of the everyman. A quick, risk heavy, las vegas, roll of the dice gamble, to avoid the honest money of the “sweat of brow”.

    Capitalism equals (relative, and highly manipulated) freedom. freedom of moral choice does not always result in a good.

  • fw

    I see greed and covetousness on the level of the everyman. A quick, risk heavy, las vegas, roll of the dice gamble, to avoid the honest money of the “sweat of brow”.

    Capitalism equals (relative, and highly manipulated) freedom. freedom of moral choice does not always result in a good.

  • http://poststop.wordpress.com Ethan

    One of my favorite Mark Cuban posts. The Stock Market is for Suckers.

    http://tinyurl.com/ybz92b

  • http://poststop.wordpress.com Ethan

    One of my favorite Mark Cuban posts. The Stock Market is for Suckers.

    http://tinyurl.com/ybz92b

  • Joe

    There is nothing less honest about making money through investment devices. Making money only becomes an evil if you being to love your money. Wanting to have a bunch of money does not necessarily equate to love of money. Indeed, higher levels of wealth can make it possible for you to do more good.

  • Joe

    There is nothing less honest about making money through investment devices. Making money only becomes an evil if you being to love your money. Wanting to have a bunch of money does not necessarily equate to love of money. Indeed, higher levels of wealth can make it possible for you to do more good.

  • http://www.cockahoop.com/ tODD

    Frank (@5), I don’t think you can say that people who legitimately invest in such markets always “roll … the dice” or do no “honest” work. Heck, my wife, merely in choosing what funds to invest in for retirement, does enough research to make me sweat. To say nothing of the people at those funds who are themselves doing market research to give us a good return on our investment.

    That said, I have a hard time agreeing with Joe’s statement (@7) that “Wanting to have a bunch of money does not necessarily equate to love of money.” I’m pretty certain that’s exactly what it equates to. Anybody who tells me they want to get rich so they can do more good is gonna get a hearty snicker.

  • http://www.cockahoop.com/ tODD

    Frank (@5), I don’t think you can say that people who legitimately invest in such markets always “roll … the dice” or do no “honest” work. Heck, my wife, merely in choosing what funds to invest in for retirement, does enough research to make me sweat. To say nothing of the people at those funds who are themselves doing market research to give us a good return on our investment.

    That said, I have a hard time agreeing with Joe’s statement (@7) that “Wanting to have a bunch of money does not necessarily equate to love of money.” I’m pretty certain that’s exactly what it equates to. Anybody who tells me they want to get rich so they can do more good is gonna get a hearty snicker.

  • Joe

    tODD, I think that you are misreading my post. My point is that a desire to increase your wealth does not “necessarily” equate to sinfulness or evil. There is a difference between desire and love. I desire to be financially secure, even hopping to have a bit more than I actually need at the present in case I need it later, but I don’t love my money. Not with the kind of idolatrous love that is the “root of all kinds of evil” (1 Tim 6:10).

    Perhaps, I should not have written “a bunch of money” but I think (hope) my actual point was still clear.

    And I suppose I should also snicker the next time the Director of the Stewardship Board my congregation talks about increasing our giving so that the Church has more money for mission work.

  • Joe

    tODD, I think that you are misreading my post. My point is that a desire to increase your wealth does not “necessarily” equate to sinfulness or evil. There is a difference between desire and love. I desire to be financially secure, even hopping to have a bit more than I actually need at the present in case I need it later, but I don’t love my money. Not with the kind of idolatrous love that is the “root of all kinds of evil” (1 Tim 6:10).

    Perhaps, I should not have written “a bunch of money” but I think (hope) my actual point was still clear.

    And I suppose I should also snicker the next time the Director of the Stewardship Board my congregation talks about increasing our giving so that the Church has more money for mission work.

  • http://www.cockahoop.com/ tODD

    Joe, having read your second post (@9), I’m not sure I did misread your the first. But let’s see …

    You said, “a desire to increase your wealth does not ‘necessarily’ equate to sinfulness or evil.” I’ll give you that. You then said, “There is a difference between desire and love.” And while that’s true as such, I’m not sure it matters in this context. Is there a difference between desire for money and love of money, given that we’re obviously not talking about some romantic notion here? They both seem the same to me.

    And while I will assume that your self-assessment is correct, I nonetheless always hear warning sirens go off when Christians assert that their behavior isn’t sinful and doesn’t cross a line written in Scripture.

    I mean, whom or what do we trust for our security? Jesus? Or money? What is “financial security”, and is it biblical? What did Jesus say about providing for us? What did Jesus say about the poor widow’s gift — did it have anything to do with financial security?

    The poor widow is also a good thing to keep in mind as regards your last sentence. Jesus praised her for her faith, not the size of her gift. Can we read this and hear that God wants us to earn more money so we can give more? Why do we give — is it to fund things, or out of thanks to Jesus for what he has done?

    By all means, if you are moved out of thankfulness to God, do give more — whether the stewardship director asks or not. But the actual material value you’re giving doesn’t matter — as with all things, it is our heart and devotion that God wants, and he wants it completely.

    Thankfully, we are forgiven when we fall short in all these things.

  • http://www.cockahoop.com/ tODD

    Joe, having read your second post (@9), I’m not sure I did misread your the first. But let’s see …

    You said, “a desire to increase your wealth does not ‘necessarily’ equate to sinfulness or evil.” I’ll give you that. You then said, “There is a difference between desire and love.” And while that’s true as such, I’m not sure it matters in this context. Is there a difference between desire for money and love of money, given that we’re obviously not talking about some romantic notion here? They both seem the same to me.

    And while I will assume that your self-assessment is correct, I nonetheless always hear warning sirens go off when Christians assert that their behavior isn’t sinful and doesn’t cross a line written in Scripture.

    I mean, whom or what do we trust for our security? Jesus? Or money? What is “financial security”, and is it biblical? What did Jesus say about providing for us? What did Jesus say about the poor widow’s gift — did it have anything to do with financial security?

    The poor widow is also a good thing to keep in mind as regards your last sentence. Jesus praised her for her faith, not the size of her gift. Can we read this and hear that God wants us to earn more money so we can give more? Why do we give — is it to fund things, or out of thanks to Jesus for what he has done?

    By all means, if you are moved out of thankfulness to God, do give more — whether the stewardship director asks or not. But the actual material value you’re giving doesn’t matter — as with all things, it is our heart and devotion that God wants, and he wants it completely.

    Thankfully, we are forgiven when we fall short in all these things.

  • Joe

    “But the actual material value you’re giving doesn’t matter — as with all things, it is our heart and devotion that God wants, and he wants it completely.”

    I could not agree with this more. I don’t mean to suggest otherwise. I was just recognizing the reality that giving $20 instead of $10 will, for example, allow a food pantry to give out more food. I am in any way trying to make an argument about the relative value in God’s eyes. God looks to our heart.

    “‘There is a difference between desire and love.’ And while that’s true as such, I’m not sure it matters in this context. Is there a difference between desire for money and love of money, given that we’re obviously not talking about some romantic notion here? They both seem the same to me.”

    I stated what kind of love, I was talking about – idolatry. Putting the love of money before God. That is the danger. That is what St. Paul is warning us about. But putting your God given talents to valuable use and increasing your wealth does not necessary equate to idolatry. It can (and I am sure I would see many times when it had in my own life) but it doesn’t have to. If you do not desire some sort of financial security, why do you worry about investing for the future as you indicated you did in post 8?

    “What is ‘financial security’, and is it biblical?” In the sense that God has given me gifts and a vocation that allows me to make enough money to secure my family financially, I would say it is indeed Biblical.

    I really don’t think I said anything that controversial. If it seems that I have, I must not be articulating very well today.

  • Joe

    “But the actual material value you’re giving doesn’t matter — as with all things, it is our heart and devotion that God wants, and he wants it completely.”

    I could not agree with this more. I don’t mean to suggest otherwise. I was just recognizing the reality that giving $20 instead of $10 will, for example, allow a food pantry to give out more food. I am in any way trying to make an argument about the relative value in God’s eyes. God looks to our heart.

    “‘There is a difference between desire and love.’ And while that’s true as such, I’m not sure it matters in this context. Is there a difference between desire for money and love of money, given that we’re obviously not talking about some romantic notion here? They both seem the same to me.”

    I stated what kind of love, I was talking about – idolatry. Putting the love of money before God. That is the danger. That is what St. Paul is warning us about. But putting your God given talents to valuable use and increasing your wealth does not necessary equate to idolatry. It can (and I am sure I would see many times when it had in my own life) but it doesn’t have to. If you do not desire some sort of financial security, why do you worry about investing for the future as you indicated you did in post 8?

    “What is ‘financial security’, and is it biblical?” In the sense that God has given me gifts and a vocation that allows me to make enough money to secure my family financially, I would say it is indeed Biblical.

    I really don’t think I said anything that controversial. If it seems that I have, I must not be articulating very well today.

  • fw

    Joe and Todd

    Great posts.

    Luther , dealing with a passage that addresses sexual immorality and coveteousness says that of the two sins, coveteousness is much harder to preach on as a sin, because it is easier to mask coveteousness as something righteous and good, whereas sexual sins tend to be more blatant and transparent. He further says that coveteousness is a sin that only a christian can truly understand and that is hard for a preacher to preach against because how can you argue against hard work and the prudence of building up a nest egg.

    It is therefore easy for us to lie to ourselves and others about. and … Luther maintains that most injustice in society has covetousness at it´s root. This is a profound judgement.

    This last point Dr Luther makes has made me think alot about the problems in our own society and rethink what people are saying really.

    One example: In discussions of government power and it´s limits, no one discusses usury laws, mortgage schemes like interest only loans, that seem deceptive or unconscionable. If the government for example limited consumer interest to 6%, it would be harder for the poor to finance, but maybe that would actually be a good thing. maybe better than addressing potential bankruptcy fraud by removing that as a true option?

    usury limits would restrict the free market, and would be based on a moral judgement. are those valid arguments against usury laws? I am thinking that the loosening of these laws, in combination with loosening of banking regulations over the past 20 years maybe is the root cause of all our problems.

  • fw

    Joe and Todd

    Great posts.

    Luther , dealing with a passage that addresses sexual immorality and coveteousness says that of the two sins, coveteousness is much harder to preach on as a sin, because it is easier to mask coveteousness as something righteous and good, whereas sexual sins tend to be more blatant and transparent. He further says that coveteousness is a sin that only a christian can truly understand and that is hard for a preacher to preach against because how can you argue against hard work and the prudence of building up a nest egg.

    It is therefore easy for us to lie to ourselves and others about. and … Luther maintains that most injustice in society has covetousness at it´s root. This is a profound judgement.

    This last point Dr Luther makes has made me think alot about the problems in our own society and rethink what people are saying really.

    One example: In discussions of government power and it´s limits, no one discusses usury laws, mortgage schemes like interest only loans, that seem deceptive or unconscionable. If the government for example limited consumer interest to 6%, it would be harder for the poor to finance, but maybe that would actually be a good thing. maybe better than addressing potential bankruptcy fraud by removing that as a true option?

    usury limits would restrict the free market, and would be based on a moral judgement. are those valid arguments against usury laws? I am thinking that the loosening of these laws, in combination with loosening of banking regulations over the past 20 years maybe is the root cause of all our problems.

  • fw

    I would suggest that the practical diagnostic for what is idolatry or not is worry. worry is the liturgy we offer to our idols. Idols literally eat their devotees this way.

    When your money is seriously at jeopardy, a quick search of one´s heart and how much worry occurs, quickly reveals the truth.

    I almost lost half my income a few months ago. I considered how devastating that would be for me. I had a major pannic attack.

    I am now working to arrange my affairs so that money does not matter so much, and asking God to remove this idolatry from my heart.

  • fw

    I would suggest that the practical diagnostic for what is idolatry or not is worry. worry is the liturgy we offer to our idols. Idols literally eat their devotees this way.

    When your money is seriously at jeopardy, a quick search of one´s heart and how much worry occurs, quickly reveals the truth.

    I almost lost half my income a few months ago. I considered how devastating that would be for me. I had a major pannic attack.

    I am now working to arrange my affairs so that money does not matter so much, and asking God to remove this idolatry from my heart.

  • fw

    what you worry about. THERE is your idol.

    I am not talking about planning etc.

    I am talking about one´s mind continuing to spin even after one has considered all possible courses of action and has taken all possible action and made all possible plans , and still is consumed by that part that is out of our hands….

    that which is not of faith is sin. Indeed.

  • fw

    what you worry about. THERE is your idol.

    I am not talking about planning etc.

    I am talking about one´s mind continuing to spin even after one has considered all possible courses of action and has taken all possible action and made all possible plans , and still is consumed by that part that is out of our hands….

    that which is not of faith is sin. Indeed.

  • fw

    all sin has idolatry at it´s root!

  • fw

    all sin has idolatry at it´s root!

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