This And That

In addition to taking care of all the standard chores associated with cold snaps down here [lows in the 40s aren’t normal this time of year, and tonight and tomorrow will probably be records], watching Rick go nuts in the Pacific near Baja, and the fires down under in XXXX/Oz/Australia, I have been watching the fantasy world that constitutes media reporting on financial issues.

The big news this past week was the Dow going above 10K – big damn deal. The Dow Jones Industrial Average is an artifice supposedly based on the stock price of 30 widely held stocks. Only one of those 30 companies has been part of the Average since it was started, General Electric. The other 29 have been rotated at the whim of Dow Jones Inc., now part of Rupert Murdock Inc., and is now being shopped around so Rupert can get some cash flow.

When Alcoa and Intel, both current members of the “club”, reported seemingly good news, the number went up, and when BofA, also part of the clique, reported bad news, it went down. This says nothing about the actual health of the economy, only the stock prices of thirty companies. Most people who supposedly own stock, are actually invested through mutual funds. If stock prices move up too quickly, a lot of people who held on, rather than cashing out their 401(k)s, will drop stocks like a hot rock.

As Badtux explained at his place, the current “wunderkind” CEOs don’t know anything about the products they make, they only know how to sell stuff. The MBA CEO is interested in the stock market, not the market for their company’s products, so they do things that boost stock prices in the short term, but make their company less viable for the long term.

The Dow is a relic from an earlier era when we actually had “industrials” in the US that made things. If we don’t start investing in making things in this country again, and in the research and development necessary to make things people want to buy, it doesn’t matter how low prices are, no one will be able to pay them.