Stock Market Rallies on Murder of Jo Cox; Wall Street Journal Defends It
By Pam Martens and Russ Martens:
The U.S. stock market was mired in red ink yesterday morning with every major Wall Street bank trading down on news that multiple polls in Britain were showing that a majority of citizens were in favor of the United Kingdom withdrawing from the European Union (EU). A referendum vote on the issue is to be held next Thursday.
Then, at 12:17 p.m. New York time yesterday, Bloomberg News printed the following headline: “U.K. Lawmaker Jo Cox Is Murdered, Silencing Brexit Debate.” Cox was a Member of Parliament from the Labour Party who was an advocate for the U.K. remaining in the EU. Cox, a mother of two children, was shot and stabbed by a man said to be in favor of Brexit, the term for a British exit from the EU. On the news of her death, which fueled the market perception that it would dampen the zeal to leave the EU, the pound and euro rallied along with the Dow Jones Industrial Average and Wall Street bank stocks.
After the U.S. market closed, with the Dow up 92 points on the day, an abrupt turnaround from morning trading, James Mackintosh penned an article at the Wall Street Journal taking note that markets can appear “callous,” but justifying the market reaction to the death of Cox with this line of reasoning:
“But one of the points of markets is that they are amoral. Not immoral — although much of the wrongdoing uncovered after the financial crisis certainly was — but unconcerned with morality at all. They are deliberately unfeeling, heartless and unsympathetic, because they exist to balance out millions of individual views in order to allocate capital and assess risk.”
This is simplistic and naively wrong on so many levels. Let’s start with the U.S. market’s ability to “allocate capital and assess risk.” Here’s what Ron Chernow correctly had to say on this subject back in 2001 in the New York Times:
“Let us be clear about the magnitude of the Nasdaq collapse. The tumble has been so steep and so bloody — close to $4 trillion in market value erased in one year — that it amounts to nearly four times the carnage recorded in the October 1987 crash.” Chernow likened the NASDAQ stock market to a “lunatic control tower that directed most incoming planes to a bustling, congested airport known as the New Economy while another, depressed airport, the Old Economy, stagnated with empty runways. The market functioned as a vast, erratic mechanism for misallocating capital across America.”
The U.S. stock market at that time was corrupted by crooked research analysts at the still crooked Wall Street mega banks who were pumping out buy recommendations to the public while internally calling the stocks “crap,” and debating how to put lipstick on the pigs they were peddling.