By Nicholas Santiago on March 4th, 2010 3:23pm Eastern Time
Economists and analysts have had opinions for as long as one can remember. To my knowledge very few analysts and economists have been correct in predicting problems in the economy or in stock prices. If they made effective calls they would have accurately predicted the 2000 and the 2007 stock market declines. Stock traders seem to have a much better handle on the direction of the economy and the movement of stocks.
In 2007 it was the stock traders that accurately forecasted the decline in the stock market when the S&P 500 (INDEXSP:.INX) was trading at 1576.00. To my knowledge it was again stock traders that accurately predicted the severe decline in oil in July 2008. At that time the U.S. Oil Fund LP ETF (NYSE:USO) was trading at near 120.00 a share before finding a low in February 2009 at 23.00 a share. Spot crude was trading at 147.00 a barrel and Goldman Sachs (NYSE:GS) and many other analysts were predicting oil to trade above 200.00 a barrel. Again it was the traders that saw the decline that followed.
Here we are today with unemployment near 10 percent in the U.S. by government standards and deficits that are mounting in the trillions of dollars that can not be calculated. The only solution by our central bank and the government for the problem is to print more money and try and inflate it back to health. Traders know that this can only work so long. Meanwhile economists say things are getting better and the worst is over. It is really similar to putting a band aid on a fractured scull. Who thinks this is really working?
Now even traders will be wrong from time to time. However, a good trader knows when he or she is wrong and they will stop out of their position taking a small loss. Economists and analysts look for reasons why they were wrong. Why didn't Citigroup Inc (NYSE:C) analysts and economists down grade their own stock when it was 55.00 a share in 2007? Currently interest rates are set by the Federal Reserve Bank instead of being traded by supply and demand. Why? History has proven that they are not better than the market. Perhaps the administration should hire a trader to get this country in order.
Nicholas Santiago
Chief Market Strategist
InTheMoneyStocks.com
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