Stock Market as a Teeter Totter


I guess it’s a “no-brainer” to view the U.S. stock market or any country’s financial market as a child’s teeter totter. I use the web site to watch the stock market during the day. At the top of the webpage, just above the market charts, there is a linear graphic that displays the total  NYSE  (New York Stock Exchange) universe of 6,000 plus stocks.

Today (8/31/2015) is one of those days that the stock market looks like the drawing. Three thousand (3000 or so) stocks are on the “downside” or declining, and three thousand 3,000 or so) stocks are on the “upside” or advancing in the marketplace.  If there seems to be very little action in the market, the teeter totter is horizontal meaning level, I think of it as “biding time” or “waiting” for something to happen. Ha! as if enough has not happened recently, many stocks have had a 10% correct which is considered “bearish” meaning the “market” is moving toward a “bear market” vs. being in a “bull market”. For those who have not followed the U.S. stock market, it has been in a very bullish phase for about six (6) years now. A very long time in the opinion of many financial professionals.

The NYSE (New York Stock Exchange) by itself  had been around since 1792! Folklore tells the story of  “traders gathering under a tree at Wall Street and Broad Street to trade  in New York City .  The NYSE consists of over 6,000 corporations’ stock listings. You might still visit the NYSE in New York City to witness the “open outcry” system of trading stocks, however, thanks to high-speed computers much of contemporary stock, option, futures, and commodity trading takes place “over the wires” with ultra high-speed computers. There is talk of eliminating the trading pits and thus all trading will transpire strictly electronically. NO MORE HUMANS! Well, no humans on a trading floor. Everyone will be sitting at a desk and using several computer screens to track and trade financial instruments. Here’s an article from Reuter’s about the shut down of the Chicago Board of Trade’s trading pits.

The NYSE is now part of a group of exchanges. The group is called  the ICE Intercontinental Exchange.

In order for there to be a “trade”, there must be a buyer and a seller. So, one might say that when the teeter totter is level, the buyers (buy orders) and sellers (sell orders) match, i.e. buyer A wants to buy 500 shares of GE and seller B wants to sell 500 shares of GE. We’ve got a “match”, so there’s a completed transaction performed. What gets “sticky” is when there are more sellers than buyers. In other words, seller B wants to sell (or in a downward market, a better word might be “unload”) 5,000 shares of GE. Humm let’s make it 5,000,000 (yes that’s million) shares of GE and can’t find a buyer or buyers  for that amount of shares. That type of volume and dilemma may cause market volatility. The teeter totter loses equilibrium and “corrections” may develop in the general stock market. There are brokerage firms called “market makers”.  Investopedia has a very short video explaining the role of a market maker. It’s the “job” of a market maker to help alleviate the trading dilemma or “imbalance” that develops when there are too many buyers or sellers of a stock.

Author’s Note:  As of May 2016, unfortunately, the MarketWatch site no longer displays its information as I previously mention above. I miss the webpage design that was used. The “teeter totter” is no longer available to me as a visual indicator of the New York Stock Exchange’s activity. Such is life! Sometimes it changes for the better, sometimes for the worse.

Eye Crosser #10: The Velocity of Money

You’ve heard of wind velocity? The weather man may refer to it when reporting on hurricanes or violent storms.  If not, here’s a definition:

The horizontal direction and speed of air motion.

Dictionary of Military and Associated Terms. S.v. “wind velocity.” Retrieved August 29 2015 from

Well, how about the velocity of money? Have you heard of that? No! Got you there, right! Well, here’s the “skinny” on the velocity of money.

The rate at which money is exchanged from one transaction to another, and how much a unit of currency is used in a given period of time. Velocity of money is usually measured as a ratio of GNP to a country’s total supply of money.

Read more: Velocity Of Money Definition

The velocity of money was one of the many, many concerns of financial and economic professionals during the Great Recession. During that multi-year world-wide disaster, it was the lack of velocity or the slowness of rate of money exchanged, that concerned everyone. Notice from the above definition that the velocity of money is used to compute the Gross National Product (GDP). Here’s my “By the Numbers” posting about GDP.

The Federal Reserve Bank of St. Louis (Missouri) is a district (or branch) bank of the Federal Reserve Bank. They have created a short 12-minute video  Money and Inflation. The video discusses the velocity of money, inflation, plus gives examples of the “value” of money. Wow, it’s complicated! That’s why I’m calling this another Eye Crosser topic! Enjoy.

Author’s Addendum on 9/13/15: I found a very detailed explanation (dated year 2010) and example of the “velocity of money by Paul Kedrosky quoting John Mauldin: Mauldin the Velocity of Money. It’s rather lenghty with charts. Enjoy!


Meet the FOMC: Federal Open Market Committee

Because of the media attention to the Jackson Hole meeting being held this weekend August 29, 2015, you are probably hearing quite a bit from the Federal Reserve’s district presidents and their opinions regarding raising  the Fed Funds Rate.

Guess it’s about time to meet the Federal Open Market Committee (FOMC). The FOMC is a committee of members of the U.S. Federal Reserve Bank (the Fed). The Fed has twelve (12) district banks located in each of twelve (12) Fed districts across the United States. Four (4) Federal Banks district presidents are members of the FOMC at any one time. These are considered the “voting” members of the district banks. The other eight (8) district presidents of the Federal Reserve Banks are then considered “non-voting” members. There is an annual rotation of the four (4) Fed district presidents who sit on the FOMC Committee for one year.

As you listen to the opinions of the district Fed presidents, you should hear if that particular district president is a “voting” or “non-voting” member of the FOMC at the present time. A non-voting member of the FOMC committee will not be eligible to vote whether to raise the Fed Funds Rate at the September, 2015 meeting or subsequent meetings this year. The key point to keep in mind when listening to or reading an opinion of a Fed district president is whether he/she is a “voting” member at the time.

The Federal Open Market Committee (FOMC) consists of twelve members–the seven members of the Board of Governors of the Federal Reserve System; the president of the Federal Reserve Bank of New York; and four of the remaining eleven Reserve Bank presidents, who serve one-year terms on a rotating basis. The rotating seats are filled from the following four groups of Banks, one Bank president from each group: Boston, Philadelphia, and Richmond; Cleveland and Chicago; Atlanta, St. Louis, and Dallas; and Minneapolis, Kansas City, and San Francisco. Nonvoting Reserve Bank presidents attend the meetings of the Committee, participate in the discussions, and contribute to the Committee’s assessment of the economy and policy options.

Source: Federal Reserve Bank

The FOMC holds eight (8) regularly scheduled meetings every year. The entire membership of the Committee is as follows:

2015 Members of the FOMC

Information source: Board of Governors of the Federal Reserve System

Author Addendum October 2, 2015:  Here is a little information from the Federal Reserve Bank of Philadelpia on the FOMC:  A Day in the life of the FOMC

Other postings of interest:

Got your ticket to Jackson Hole?

Inflation, deflation, who ya gonna call?

When will the Federal Reserve Bank finally raise interest rates? Why should it matter?

Numbers #2:  Gross Domestic Product or GDP

Put simply, GDP is a broad measurement of a nation’s overall economic activity. Source:

Now here’s an economic indicator that can say  “one thing one minute” and then revise it (the numbers) at some future date. And, it’s OK to do so…   GDP is an example of an economic indicator that can be and “is” revised or adjusted after its “numbers have been officially released by the U.S. Department of Commerce, Bureau of Economic Analysis. Revisions to GDP are expected as a matter of course because the very nature of the GDP calculation is the summary of many different aspects of the national economy. has a very short video that explains the calculation of GDP.

Here’s a link to CNBC announcing a second quarter revision to the second quarter 2015 GDP report. It’s an example of how complicated the GDP measurement really is to calculate.

The GDP calculation tries to determine “are we, as a nation,  growing or not”. Is our economy expanding or contracting at a particular point in time.

Indicator Name:          Gross Domestic Product (GDP)

Published by:              U.S. Department of Commerce, Bureau of Economic analysis

Publishing Calendar:   Monthly with revision releases as needed or necessary


Author’s Addendum (9/13/2015): CNBC has a nice summary of the function of GDP written by Mark Koba, see Gross Domestic Product: CNBC Explains.

Rationale for the By the Numbers blog postings.

Numbers #1: Consumer Price Index (CPI)

The Consumer Price Index or CPI is quoted extensively by the media and used by the financial community in their economic reports. The CPI is a way to measure inflation.

Indicator Name:          Consumer Price Index or CPI

Published by:              U.S. Dept. of Labor, Bureau of Labor Statistics

Publishing Calendar:   Monthly


Frequently Asked Questions (FAQ) web page:


  • The CPI represents changes in prices of all goods and services purchased for consumption by urban households. User fees (such as water and sewer service) and sales and excise taxes paid by the consumer are also included. Income taxes and investment items (like stocks, bonds, and life insurance) are not included.
  • The CPI-U includes expenditures by urban wage earners and clerical workers, professional, managerial, and technical workers, the self-employed, short-term workers, the unemployed, retirees and others not in the labor force. The CPI-W includes only expenditures by those in hourly wage earning or clerical jobs.



  • As an economic indicator. As the most widely used measure of inflation, the CPI is an indicator of the effectiveness of government policy. In addition, business executives, labor leaders and other private citizens use the index as a guide in making economic decisions.
  • As a deflator of other economic series. The CPI and its components are used to adjust other economic series for price change and to translate these series into inflation-free dollars.
  • As a means for adjusting income payments. Over 2 million workers are covered by collective bargaining agreements which tie wages to the CPI. The index affects the income of almost 80 million people as a result of statutory action: 47.8 million Social Security beneficiaries, about 4.1 million military and Federal Civil Service retirees and survivors, and about 22.4 million food stamp recipients. Changes in the CPI also affect the cost of lunches for the 26.7 million children who eat lunch at school. Some private firms and individuals use the CPI to keep rents, royalties, alimony payments and child support payments in line with changing prices. Since 1985, the CPI has been used to adjust the Federal income tax structure to prevent inflation-induced increases in taxes.


Author Addendum (9/13/15): Mark Koba of CNBC wrote an article explaining the CPI: Consumer Price Index: CNBC Explains.

Rationale for the By the Numbers blog postings.


Numbers: What are Economic Indicators

I have been blogging a series of posts called Eye Crosser which feature  financial concepts or terms. With the Economic Indicator definitions that I will be posting, I will call them “By the Numbers.” Economic indicators are considered either leading or lagging indicators suggesting that they indicate an oncoming event(s) or situation is developing OR confirm the recent conclusion or resolution of the particular event(s) or situation.

Examples of Leading Economic Indicators are: inventory levels, retail sales, building permits

Examples of Lagging Economic Indicators are: unemployment rate, consumer price index

The Federal Reserve Bank along with economists employed by banks, corporations, think tanks, etc., use a compilation of these economic indicators to do their forecasting and/or predicting. You have heard many of these concepts used when listening to interviews  on financial programs, news shows, or at investor presentations.

As all my other postings, it’s an attempt to clean the economic windows and aid us in understanding a little better what’s “going on” in the financial markets. A clearer understanding of the economic indicators helps us to see how “they” got the numbers that “they” quote us.

Incidentally, to make the economic puzzle even more confusing to understand (solve), these economic indicators may be used in combination to form an accurate economic picture for a particular moment in time. Maybe some of these will be eye crossers but I make no promises!

Got Your Ticket to Jackson Hole?

Once a year in August the economic minds of the world converge on Jackson Hole, Montana.

The Federal Reserve Bank of Kansas City hosts dozens of central bankers, policymakers, academics and economists from around the world at its annual economic policy symposium in Jackson Hole, Wyo.

The Federal Reserve Bank of Kansas City is one of the twelve (12) U.S.  regional branches of the Federal Reserve Bank in Washington, D.C.  Information about the symposium is here.  The economic issue being addressed this year is  Inflation Dynamics and Monetary Policy. The Fed of Kansas City has links to conference proceedings of past symposiums for review.

How about a short trip to Grand Teton National Park, Wyoming.  Bloomberg News has a short video to show you the “digs” where the economists, etal. will convene:  Inside the Central Banking Hangouts of Jackson Hole.

As I scanned the National Park webpage in writing this posting  (evening of Aug 20) there was an alert:  Bears are active in Grand Teton.  O ho, is that a signal for the economists that the U.S. stock market is in a “correction?” For those, who do not follow the stock market news, a “bull” market is when the stock market is rising, and rising, and rising… a bear market is when the stock market is falling or “in correction”.  A 20%  correction  seems to be the signal of a “bear market” according to many of Wall Street’s financial gurus. The U.S. stock market is in a downward path at the moment. The DOW Jones Industrial Average (the DOW) has been in a correction pattern for the few days. It has fallen from 18,097 to 16,991 over the last month.

Bull markets are characterized by optimism, investor confidence and expectations that strong results will continue. It’s difficult to predict consistently when the trends in the market will change. Part of the difficulty is that psychological effects and speculation may sometimes play a large role in the markets.

See Investopedia for more definitions of  “bull” and “bear” markets. Read more: .

Many conversations during the weekend will probably include whether the Federal Reserve Bank will raise interest rates very soon.  In fact the Vice Chairman of the Fed, Stanley Fischer, will be speaking at the symposium.  As I have mentioned in earlier posts, the interest rate paid for savings accounts in the U.S. has been close to ZERO for almost ten (10) years.

Hang onto to your hats, the roller coaster ride is growing more interesting again!

Inflation… Deflation? “Who Ya Gonna Call?”

Oh, wow, how I love watching the movie, “Ghostbusters.” Just saw it again the other night. One of the main themes of the film is, “don’t cross the streams.” Of course when the ghostbusters do cross the streams of their nuclear guns, they destroy the enemy.

Is inflation an enemy? One of the responsibilities of the U.S. Federal Reserve Bank (the Fed) is controlling the inflation rate in the United States. Destroying inflation is not a good thing. A result of destroying inflation is the possibility of deflation. Wait a minute, let’s get a couple of definitions out of the way first then get on with the story of the “villains” inflation and deflation.

Here we go, Investopedia’s definitions of inflation and deflation:
DEFINITION of ‘Inflation’
Inflation is the rate at which the general level of prices for goods and services is rising and, consequently, the purchasing power of currency is falling. Central banks attempt to limit inflation, and avoid deflation, in order to keep the economy running smoothly.

Read more: investopedia definition: inflation

DEFINITION of ‘Deflation’
A general decline in prices, often caused by a reduction in the supply of money or credit. Deflation can be caused also by a decrease in government, personal or investment spending. The opposite of inflation, deflation has the side effect of increased unemployment since there is a lower level of demand in the economy, which can lead to an economic depression. Central banks attempt to stop severe deflation, along with severe inflation, in an attempt to keep the excessive drop in prices to a minimum. The decline in prices of assets, is often known as Asset Deflation.

Read more: investopedia definition: deflation

Inflation and the 2008 Global Recession

The Fed monitors the “rate of inflation” very closely. When the Fed implemented its QE (quantitative easing) programs there was a lot of concern about the vast amount of money (more than 3.5 trillion dollars) being introduced in the U.S. economic system, e.g increasing the money supply. Would this vast amount of money cause hyperinflation?

Central banks have tried to learn from such episodes, using monetary policy tools to keep inflation in check. Since the 2008 financial crisis, the U.S. Federal Reserve has kept interest rates near zero and pursued a bond-buying program – now discontinued – known as quantitative easing. Some critics of the program alleged it would cause a spike in inflation in the U.S. dollar, but inflation peaked in 2007 and declined steadily over the next eight years. There are many, complex reasons why QE didn’t lead to inflation or hyperinflation, though the simplest explanation is that the recession was a strong deflationary environment, and quantitative easing ameliorated its effects.

Read more:

An example of hyperinflation is the economic crisis that the country of Argentina experienced in the late 1980’s.  See this article from the New York Times.

The U.S. stock market, “Wall Street”, has been anticipating that the Fed will be raising rates for the past year or so. The Fed has been monitoring  the inflation rate. Interest rates might rise depending upon how much (high) the inflation rate rises. This is a very complicated calculation that the Fed compiles. The inflation rate is calculated using the Consumer Price Index, which, in itself, is a controversial measurement tool.

The Fed also watches the unemployment rate for a guide to decide upon raising the interest rate. As mentioned in an earlier blog (Eye Crosser#5: What is Inflation?),  the Fed has three (3) mandates:

  • promote maximum employment
  • stable prices
  • moderate long-term interest rates

The Fed has maintained a “near” zero percent interest rate in the United States for almost ten (10) years. This has meant that savers have  earned very negligible (if any)  interest on their savings, money market or CD (certificate of deposit) accounts on deposit at banks. This zero interest rate policy has devastated savers. They are using (spending) the principle and not just the interest earned on their savings. Those on “fixed incomes” meaning collecting Social Security, and not working in the U.S. workforce, are using up their retirement savings at a more rapid rate than anticipated.


Eye Crosser #9: The U.S. Debt Limit

As promised in an earlier posting, here’s the lowdown on the U.S. Federal debt limit. I found an nice article posted on the U.S. News & World Report website:  A Debt Ceiling History Lesson.

It seems that several Presidents have grappled with the Congress over raising the “debt ceiling.” What is interesting is how the elected officials go about justifying or not justifying the raising of the U.S. debt ceiling. If we default on paying our bills, it means that the U.S. defaults on its debt. Defaulting, of course, means that one reneges on paying his/her debt on time as promised.

Here’s the definition of debt limit according to the U.S. Department of the Treasury:

The debt limit is the total amount of money that the United States government is authorized to borrow to meet its existing legal obligations, including Social Security and Medicare benefits, military salaries, interest on the national debt, tax refunds, and other payments. The debt limit does not authorize new spending commitments. It simply allows the government to finance existing legal obligations that Congresses and presidents of both parties have made in the past.

Bloomberg QuickTake in its article The Debt Ceiling  dated March 15, 2015,  gives the following conclusion:

 The Argument

At least one thing is clear about the debt ceiling: It hasn’t restrained the federal debt. That’s in the hands of Congress when it sets levels of taxation and spending, then borrows money when it overspends. Raising the debt ceiling simply lets the government pay for things it has already decided to buy. As a result, some budget experts and commentators want to abolish it, arguing that the uncertainty of Congressional battles costs taxpayers money by increasing economic uncertainty, among other problems. Debt-limit supporters say opponents overstate the potential harm and that using it to bargain for spending cuts serves the public interest at a time of historically high debt levels.

Just a refresher, recall from my posting Eye crosser #6: Debt vs. Deficit posting:

Deficit= difference between what the Federal Government “takes in” and what the Federal Government “pays out.” If you spend more than you earn or in the instance of the U.S. Government, what you collect in taxes, then you have a deficit.

Debt= according to the Treasury site, “One way to think about the debt is as accumulated deficits.” The United States consistently borrows (issues Treasury investment instrument)  more money than it pays back to the loaner. The United States is limited in how much money it can borrow by the Debt Limit. Our Federal debt limit is controlled and determined by the Congress of the United States. In the last few years we have certainly heard a lot about “raising” the debt limit.

Author’s Addendum 9/13/2015: Here’s a nice explanation of U.S. national debt ceiling written by Mark Koba at CNBC: Debt Ceiling: CNBC Explains. Although it was written on October 8, 2013, the information is still valuable.  In fact, the U.S. Congress and the President are jousting again in September, 2015, with another shutdown of the U.S. government looming.

Author’s Addendum 9/13/2015: Another CNBC article, this time it’s National Debt: CNBC Explains. Again Mark Koba does a nice job of explaining “debt” vs. “deficit”. Article is dated 6/29/2011 but still relevant.

Addendum to “Is a Strong U.S. Dollar good or bad?”

Here’s a great example of a country’s currency pegged to another currency which is pegged to the U.S. Dollar. Thanks to

The devaluation of the yuan against the U.S. dollar last week pressured the shares of  Wynn Resorts WYNN, ” Weak Yuan Manageable for Wynn”

Sales and expenses derived in Macau are denominated in the pataca, the region’s legal currency. The pataca is pegged to the Hong Kong dollar, which is in turn pegged to the U.S. dollar.

This example is an addendum to my posting:  Is a Strong U.S. Dollar good or bad?