Dow falls 799

It's all about Trump.

Trump lied about tariff progress. He said there was an agreement. There wasn't. The stock market fell.

I am a retired financial advisor and was supposed to be able to explain why markets rise and fall.

When markets make big changes people whose job it is to explain things to clients--particularly major investment banks Merrill Lynch and Morgan Stanley--put out comments to explain why. Their credibility is at stake. If they don't know why things happen, why pay them? 

News organizations covering financial news also employ analysts who understand why things happen.  Surely if something changed the value of all the businesses in the US by 3% in a day--a loss of a trillion dollars--there must be a reason. They, too, have credibility at stake.  If they cannot explain things, why trust their reporting? So they, too, come up with something.

I think the actual, honest answer is that no one understands why the market rises or falls. Sellers were more insistent than buyers, so the price fell to bring in buyers getting what they thought were bargains and those buyers matched up to the sellers. It explains what happened, but not why.

CNN: Click

Maybe it’s the bad yield curve (some short term rates now exceed long term rates.) Maybe it was movement in advance of the market closure today for George HW Bush's funeral, and people who wanted to be out of the market got out in a rush. Maybe the Brexit mess in the UK frightened people. Maybe the Paris riots did. Maybe Mueller's progress implies impending Constitutional crisis. There are always lots of reason to sell.

The key takeaway is that Wall Street and most of the news media is blaming it on Trump.

His tariffs generally upset the economy, he implied he was reaching a settlement with China. Buyers came into the market o the good news. Trump's statement was--to describe it simply--a lie. The White House and Trump could not sustain the fiction.

Wall Street told investors that we had been hoodwinked.

Goldman Sachs said: "the actual amount of concrete progress made at the meeting appears to have been quite limited."

A Baird spokesperson said: "The sense is that there's less and less agreement between the two sides about what actually took place. There was a rally in expectation that something happened. The problem is that something turned out to be nothing."

J P Morgan said: "It doesn’t seem like anything was actually agreed to at the dinner and White House officials are contorting themselves into pretzels to reconcile Trump’s tweets (which seem if not completely fabricated then grossly exaggerated) with reality.” 

(Investment banks don't want to use the word "lie.")

Journalists had their story. CNN's business reporters said the Dow dropped because investors were realizing that nothing concrete had actually come out of the meetings between Trump and Chinese President Xi Jinping.

The very pro-Trump New York Post had the same story, but averted their eyes from Trump and used the passive voice: "Stocks took a nosedive on Wall Street as investors worried that a US-China trade truce reached over the weekend wasn’t all it was cracked up to be."

Trump's method is to be in the center of everything and we are witnessing the political downside of that: blame Trump. People who believed Trump lost real money.

There is a school of thought that "everyone knows" Trump lies, that it is just Trump being Trump, and what he says is fully discounted by people, so Trump doesn't really hurt anybody when he says things that just aren't so.

Apparently not.

Investors bought on the premise that the trade dispute with China was abating were hoodwinked, and they lost money as a result.